Legislature(2007 - 2008)TERRY MILLER GYM

06/05/2008 09:00 AM House RULES


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Audio Topic
09:03:17 AM Start
09:04:00 AM HB3001|| SB3001
04:42:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
+ HB3001 APPROVING AGIA LICENSE TELECONFERENCED
Heard & Held
House Special Subcommittee on AGIA
Joint w/Sen Special Committee on Energy
LB&A Consultants:
Lesa Adair, Muse Stancil & Co: continued
Dan E. Dickinson, CPA
Available for questions:
Barry Pulliam, Econ One Research, Inc.
John Neri, Ph.D., Benjamin Schlesinger &
Assoc., Inc
Bill Mogel, Attorney, Saul Ewing, LLP
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
                 HOUSE RULES STANDING COMMITTEE                                                                               
               SENATE SPECIAL COMMITTEE ON ENERGY                                                                             
                          June 5, 2008                                                                                          
                           9:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 Representative John Coghill, Chair                                                                                             
 Representative John Harris (AGIA Subcommittee, Chair)                                                                          
 Representative Anna Fairclough                                                                                                 
 Representative Craig Johnson                                                                                                   
 Representative Ralph Samuels (AGIA Subcommittee)                                                                               
 Representative Beth Kerttula (AGIA Subcommittee)                                                                               
 Representative David Guttenberg                                                                                                
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 Senator Charlie Huggins, Chair                                                                                                 
 Senator Bert Stedman, Vice Chair                                                                                               
 Senator Kim Elton                                                                                                              
 Senator Lyda Green                                                                                                             
 Senator Lyman Hoffman                                                                                                          
 Senator Lesil McGuire                                                                                                          
 Senator Donald Olson                                                                                                           
 Senator Gary Stevens                                                                                                           
 Senator Joe Thomas                                                                                                             
 Senator Bill Wielechowski                                                                                                      
 Senator Fred Dyson                                                                                                             
 Senator Thomas Wagoner                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 All members present                                                                                                            
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 All members present                                                                                                            
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Bob Buch                                                                                                         
Representative Mike Chenault                                                                                                    
Representative Sharon Cissna                                                                                                    
Representative Harry Crawford                                                                                                   
Representative Nancy Dahlstrom                                                                                                  
Representative Andrea Doll                                                                                                      
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Berta Gardner                                                                                                    
Representative Carl Gatto                                                                                                       
Representative Mike Hawker                                                                                                      
Representative Lindsey Holmes                                                                                                   
Representative Kyle Johansen                                                                                                    
Representative Reggie Joule                                                                                                     
Representative Scott Kawasaki                                                                                                   
Representative Wes Keller                                                                                                       
Representative Mike Kelly                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Bob Lynn                                                                                                         
Representative Kevin Meyer                                                                                                      
Representative Mark Neuman                                                                                                      
Representative Kurt Olson                                                                                                       
Representative Bob Roses                                                                                                        
Representative Woodie Salmon                                                                                                    
Representative Paul Seaton                                                                                                      
Representative Bill Stoltze                                                                                                     
Representative Bill Thomas                                                                                                      
Representative Peggy Wilson                                                                                                     
                                                                                                                                
Senator Con Bunde                                                                                                               
Senator Bettye Davis                                                                                                            
Senator Johnny Ellis                                                                                                            
Senator Hollis French                                                                                                           
Senator Gene Therriault                                                                                                         
Senator Gary Wilken                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 3001                                                                                                             
"An Act  approving issuance of  a license by the  commissioner of                                                               
revenue and the commissioner of  natural resources to TransCanada                                                               
Alaska Company,  LLC and  Foothills Pipe  Lines Ltd.,  jointly as                                                               
licensee, under the Alaska Gasline  Inducement Act; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
SENATE BILL NO. 3001                                                                                                            
"An Act  approving issuance of  a license by the  commissioner of                                                               
revenue and the commissioner of  natural resources to TransCanada                                                               
Alaska Company,  LLC and  Foothills Pipe  Lines Ltd.,  jointly as                                                               
licensee, under the Alaska Gasline  Inducement Act; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 3001                                                                                                                 
SHORT TITLE: APPROVING AGIA LICENSE                                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
06/03/08       (H)       READ THE FIRST TIME - REFERRALS                                                                        
06/03/08       (H)       RLS                                                                                                    
06/03/08       (H)       WRITTEN FINDINGS & DETERMINATION                                                                       
06/04/08       (H)       RLS AT 9:00 AM CAPITOL 120                                                                             
06/04/08       (H)       Heard & Held; Assigned to Subcommittee                                                                 
06/04/08       (H)       MINUTE(RLS)                                                                                            
06/05/08       (H)       RLS AT 9:00 AM TERRY MILLER GYM                                                                        
                                                                                                                                
BILL: SB 3001                                                                                                                 
SHORT TITLE: APPROVING AGIA LICENSE                                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
06/03/08       (S)       READ THE FIRST TIME - REFERRALS                                                                        
06/03/08       (S)       ENR                                                                                                    
06/03/08       (S)       REPORT ON FINDINGS AND DETERMINATION                                                                   
06/04/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/04/08       (S)       Heard & Held                                                                                           
06/04/08       (S)       MINUTE(ENR)                                                                                            
06/05/08       (S)       ENR AT 9:00 AM TERRY MILLER GYM                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LESA ADAIR                                                                                                                      
Muse Stancil & Co.                                                                                                              
Addison, Texas                                                                                                                  
POSITION STATEMENT:  Continued her presentation titled                                                                        
"TransCanada Gas Pipeline and Storage Assets."                                                                                  
                                                                                                                                
DAN DICKINSON, Certified Public Accountant (CPA), Consultant                                                                    
Legislative Budget and Audit Committee                                                                                          
Alaska State Legislature                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided his  presentation  titled  "Some                                                             
things  to   look  for  and   ask  about  in  the   AGIA  License                                                               
Determination."                                                                                                                 
                                                                                                                                
JOHN NERI, PhD, Consultant                                                                                                      
Benjamin Schlesinger & Assoc., Inc.                                                                                             
Bethesda, Maryland                                                                                                              
POSITION STATEMENT:  During hearing, answered questions.                                                                      
                                                                                                                                
BARRY PULLIAM, Consultant                                                                                                       
Econ One Research, Inc.                                                                                                         
Los Angeles, California                                                                                                         
POSITION STATEMENT:  During hearing, answered questions.                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
REPRESENTATIVE  RALPH SAMUELS  called  the joint  meeting of  the                                                             
House  Rules  Standing Committee  Subcommittee  on  AGIA and  the                                                               
Senate Special Committee on Energy to order at 9:03:17 AM.                                                                    
                                                                                                                                
HB 3001-APPROVING AGIA LICENSE                                                                                                
SB 3001-APPROVING AGIA LICENSE                                                                                                
                                                                                                                                
REPRESENTATIVE  SAMUELS  announced  that today  Ms.  Adair  would                                                               
continue her  presentation titled  "TransCanada Gas  Pipeline and                                                               
Storage Assets."                                                                                                                
                                                                                                                                
9:04:00 AM                                                                                                                    
                                                                                                                                
LESA ADAIR,  Muse Stancil  & Co., reviewed  the matters  that she                                                               
would discuss today as specified  on slide 33 of the presentation                                                               
titled  "Financial Assessment  of the  Impact of  the Alaska  Gas                                                               
Pipeline."    Referring  to  slide  34  titled  "TransCanada  Gas                                                               
Pipeline and  Storage Assets", Ms.  Adair related that  the table                                                               
on  this  slide  is  from the  TransCanada  Alaska  Company,  LLC                                                               
(TransCanada),  web  site and  the  numbers  presented from  2006                                                               
aren't  that   different  than  those   for  2007.     The  table                                                               
illustrates that  TransCanada has  significant gas  throughput on                                                               
its  systems.   She  emphasized the  need to  keep  in mind  when                                                               
reviewing  these numbers  that some  of these  systems feed  into                                                               
other  systems.    Therefore,  one  can't  view  each  [of  these                                                               
throughputs] as  individual modules  of gas that  are independent                                                               
of one another.  There is  double counting, she highlighted.  For                                                               
instance, some  of the gas that  comes on the Alberta  System may                                                               
also flow into the Canadian  Mainline system.  Ms. Adair informed                                                               
the  committee  that  TransCanada   has  both  wholly  owned  and                                                               
affiliated interests in pipelines.   It's certainly the case that                                                               
for some of  these affiliated systems there  are multiple owners,                                                               
she noted.   TransCanada also owns  TC PipeLines, LP, which  is a                                                               
publicly  held   limited  partnership  that  owns   some  of  the                                                               
affiliated  interests  as  well.    She  then  relayed  that  the                                                               
appendix of  the handout includes more  detailed information with                                                               
regard  to individual  systems and  their origin  and termination                                                               
points.  Referring  to slide 35 titled  "Canadian Gas Pipelines,"                                                               
Ms. Adair  reviewed that the  Alberta System gathers  natural gas                                                               
for  the Canadian  Mainline and  connects to  the BC  System, the                                                               
Foothills System, and other pipelines  in the area.  The Canadian                                                               
Mainline extends into Eastern Canada  and delivers natural gas to                                                               
Northeastern U.S.   She  informed the  members that  Foothills is                                                               
bringing  natural  gas  from  Alberta  to  markets  in  the  U.S.                                                               
Midwest,  Pacific Northwest,  California, and  Nevada.   Ventures                                                               
LP, she  related, supports  natural gas demand  in the  oil sands                                                               
region while TQM transports from  the Canadian Mainline to Quebec                                                               
City and connects to the Portland system.                                                                                       
                                                                                                                                
MS. ADAIR, referring  to slide 35 titled  "Gas Storage Overview,"                                                               
explained that the yellow triangles  on the map represent the gas                                                               
storage  projects owned  by TransCanada,  which amounts  to about                                                               
one-third of the  natural gas storage in Alberta.   The two large                                                               
projects  [in Alberta]  are the  Edson and  Crossalta facilities,                                                               
which  are well  located to  support demand  in the  area.   "Gas                                                               
storage is  really there  to makeup  the difference  between what                                                               
the pipelines  can deliver  and demand  in high-demand  seasons -                                                               
Alberta  in  the winter  especially,"  she  said.   The  Canadian                                                               
storage  being discussed  doesn't include  the Michigan  project,                                                               
although it's  affiliated with [TransCanada's] operations  in the                                                               
ANR Pipeline.                                                                                                                   
                                                                                                                                
MS.  ADAIR then  turned  to  the gas  production  forecast.   The                                                               
numbers  that will  be shown  are  based on  the National  Energy                                                               
Board (NEB)  and other  publicly available  sources, such  as the                                                               
Energy  Information  Administration  (EIA).   She  then  directed                                                               
attention  to  the  chart  on  slide  38  titled  "Production  by                                                               
Province," which  illustrates that currently most  of the natural                                                               
gas comes from Alberta and will  continue to do so in the future.                                                               
Although there is some production  in the eastern provinces, it's                                                               
relatively small.  Following Alberta,  the next largest source of                                                               
production is British Columbia.                                                                                                 
                                                                                                                                
9:09:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG inquired  as  to the  location of  the                                                               
Yukon production on the chart [on slide 38].                                                                                    
                                                                                                                                
MS.  ADAIR  relayed  that  it's probably  a  small  slice  that's                                                               
difficult see.   Therefore, she  offered to pull the  numbers out                                                               
later for discussion.                                                                                                           
                                                                                                                                
9:10:15 AM                                                                                                                    
                                                                                                                                
MS.  ADAIR,  continuing  with slide  39  titled  "Western  Canada                                                               
Natural  Gas Production  Outlook,"  remarked that  folks like  to                                                               
review  the  various  sources  and   the  sorts  of  technologies                                                               
required to  extract oil and  gas, given the types  of reservoirs                                                               
being  exploited.    The  chart  on  slide  39  illustrates  that                                                               
conventional  drilling is  the most  common.   She then  directed                                                               
attention to the  swath representing coal bed  methane (cbm), and                                                               
added that there's  a large amount of cbm  development in Wyoming                                                               
and Montana.  Coal bed methane  development is a large trend that                                                               
is continuing  to develop  throughout North  America.   The chart                                                               
also illustrates  that shale[production],  although not  large in                                                               
Canada, is huge  in the Central U.S.  For  instance, in Texas the                                                               
Barnett shale was producing almost no  natural gas at all, but is                                                               
now producing over  3 billion cubic feet a day  (Bcf/d).  Most of                                                               
that  production came  online in  the  last three  years and  the                                                               
trend is  now extending west  to the  Texas pan handle  and north                                                               
into Louisiana and  Arkansas.  Some forecasts  project that there                                                               
could  be 4  Bcf/d from  northern Louisiana  in another  three to                                                               
five  years.    In  British  Columbia  the  shale  play  is  just                                                               
beginning, as indicated  by a recent [gas  prospects] lease sale.                                                               
She related  that there have  been about five discoveries  of the                                                               
magnitude  of  6-10  trillion cubic  feet  (Tcf)  per  discovery.                                                               
Although  how that  shale play  is  going to  develop in  British                                                               
Columbia is still  a question, the gas will  compete for capacity                                                               
and  the  new discovery  isn't  included  in the  forecast  being                                                               
presented.                                                                                                                      
                                                                                                                                
9:12:38 AM                                                                                                                    
                                                                                                                                
MS.  ADAIR then  highlighted  that the  NEB  is forecasting  that                                                               
Mackenzie  will come  on stream  in  2015 with  about 1.2  Bcf/d.                                                               
Turning  to slide  40  titled "Western  Canada  Gas Demand,"  she                                                               
pointed out that  the total gas demand by province  is well below                                                               
the  production available  from Canada  in the  timeframe of  the                                                               
forecast through  2030.  Ms.  Adair opined that  although Alberta                                                               
demand has  been strong and  it's believed that it  will continue                                                               
to grow, there  are many energy improvement projects.   Even with                                                               
respect to the  oil sands, there are efforts  to conserve natural                                                               
gas, she  related.  Still, there  will be plenty of  gas produced                                                               
to  meet the  demand in  Canada.   In response  to Representative                                                               
Samuels, Ms. Adair confirmed that  the demand is for total demand                                                               
and included the  usage of tar sands, not  just power generation.                                                               
Moving on  to slide 41  titled "Alberta Gas Demand,"  she pointed                                                               
out  that the  chart illustrates  that there  is huge  industrial                                                               
demand in  Alberta of which oil  sands is a large  portion.  Coal                                                               
gasification  is  becoming  more  prevalent and  will  likely  be                                                               
adopted  more  for  use  in  the oil  sands  going  forward,  and                                                               
therefore it's included in the forecast [presented on slide 41].                                                                
                                                                                                                                
MS. ADAIR, referring  to slide 42 titled "Alberta  Hub and Export                                                               
Capacity," reminded  legislators that the  hub is a  large market                                                               
area, not a single point in the  pipeline.  The supply to the hub                                                               
today  comes from  production in  Alberta  and British  Columbia.                                                               
The  total export  capacity out  of  Alberta is  about 11  Bcf/d,                                                               
which is post-conversion of  TransCanada's Mainline capacity that                                                               
will be put into crude oil  service.  There are new supplies from                                                               
Mackenzie and  Alaska gas coming  into Alberta at  Boundary Lake.                                                               
Therefore,  she opined  that there  is about  11 Bcf/d  take away                                                               
capacity  available.    Slide  43  titled  "Proposed  Alaska  Gas                                                               
Pipeline  Route" illustrates  where the  pipeline will  hook into                                                               
the system.   There  will be  some new  build pipe  required, she                                                               
noted.   She then  highlighted that basically  the gas  will come                                                               
in, pass through the hub, and  be available to move to almost all                                                               
the markets in the U.S.                                                                                                         
                                                                                                                                
MS. ADAIR,  referring to  the chart on  slide 44  titled "Alberta                                                               
Gas Supply Forecast,"  informed the members that  the forecast of                                                               
the Alberta production and what's  coming out of British Columbia                                                               
and  Mackenzie gas  results  in excess  capacity  in the  system.                                                               
This excess  capacity is available  before and after  Alaska gas.                                                               
Only during startup does  there pose a bit of an  issue to try to                                                               
move all the gas through  existing capacity.  She emphasized that                                                               
the timing of  when AGP [Alaska Gas Pipeline] starts  up and when                                                               
some  of the  other projects  come on  line and  how the  decline                                                               
occurs in various areas over time  are factors.  One must keep in                                                               
mind, she  opined, that NEB's  forecast is about $7  per thousand                                                               
thousand  British  thermal  unit  (MMBtu)  equivalent  Henry  Hub                                                               
price,  although gas  prices are  higher  than that  today.   The                                                               
aforementioned may stimulate  additional drilling and production,                                                               
which might  create tighter capacity utilization  here.  However,                                                               
if  the Alaska  gasline project  slips at  all, there  may be  no                                                               
problem  with   capacity.    Ms.   Adair  said,  "We   feel  very                                                               
comfortable that we're in a  good situation, with respect to that                                                               
gas  coming in  and that  if there  are changes  that need  to be                                                               
made, they're  not going to be  big changes.  You  should be able                                                               
to handle all that gas through the Alberta Hub."                                                                                
                                                                                                                                
9:18:07 AM                                                                                                                    
                                                                                                                                
MS. ADAIR,  referring to slide  45 titled "Future  Performance of                                                               
TransCanada's  Canadian Gas  Assets," informed  the members  that                                                               
Muse  Stancil staff  who  work  primarily in  oil  sands and  gas                                                               
projects performed a  study late last year regarding  how many of                                                               
the announced projects were likely to  go forward.  At that time,                                                               
the thought was  that about two-thirds of  the announced projects                                                               
would move  forward and become  productive.  Since that  time oil                                                               
prices have increased, and therefore  it's possible that it would                                                               
be  an  even  higher  percentage  of  projects  that  would  move                                                               
forward.    Most of  those  projects,  she projected,  will  move                                                               
forward in  the near- to medium-term.   Ms. Adair then  turned to                                                               
CO  sequestration and reminded members that Canada has signed the                                                               
  2                                                                                                                             
Kyoto  Accord.   Canada,  she  relayed,  is working  through  its                                                               
federal  government to  try to  implement changes  to the  system                                                               
that would adhere to the Kyoto  Accord.  In February 2008 British                                                               
Columbia  did unveil  a  carbon tax  program.   For  most of  the                                                               
places  for which  there  is concern  [regarding  CO],  including                                                               
                                                    2                                                                           
Alberta,  British Columbia,  and even  perhaps Alaska,  there are                                                               
existing  developed geologic  reservoirs.   From a  technological                                                               
standpoint, COcan   be  removed by injecting it  into reservoirs.                                                               
              2                                                                                                                 
In fact, she recalled working on  a project in the 1980s in which                                                               
a 1950s  process to take gas  off of boilers to  be injected into                                                               
the ground  for miscible flooding  was used in order  to increase                                                               
oil  recovery.   Although  this  is nothing  new  with regard  to                                                               
technology, it comes at a cost.   Ms. Adair said it remains to be                                                               
seen when  the [Kyoto  Accord] mandates  will be  implemented and                                                               
the technology that  will evolve to minimize  the cost associated                                                               
with the disposal  or minimization of green house  emissions.  In                                                               
terms of  announced projects, the aforementioned  isn't viewed as                                                               
being a big problem.                                                                                                            
                                                                                                                                
9:21:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN asked  if by  2018, when  both the  Denali                                                               
Project  and TransCanada  propose to  be running,  ConocoPhillips                                                               
Alaska, Inc. (ConocoPhillips) and BP  will have need to replenish                                                               
the reserves and  will there be the market demand  to ensure that                                                               
Alaska's gas goes into the market.                                                                                              
                                                                                                                                
MS. ADAIR  explained that  all of the  forecasts for  natural gas                                                               
demand include growth.   For example, "T-Electric"  (ph) in Texas                                                               
tried  to certificate  new coal  burning capacity.   However,  T-                                                               
Electric wasn't certificated because  of the air quality concerns                                                               
with regard  to burning coal.   "Natural gas does not  have those                                                               
kinds of  issues, yet, because ...  we haven't made big  moves to                                                               
limit natural gas  electrical generation," she pointed  out.  She                                                               
also pointed out  that many projects are being  developed to meet                                                               
the  increased  demand.    The future  seems  to  hold  continued                                                               
demand.   In fact, the  current demand in  the U.S. is  being met                                                               
with  imports from  Canada.   She projected  that those  Canadian                                                               
imports will continue  to be needed as well  as liquefied natural                                                               
gas  (LNG).   Ms.  Adair  opined that  there  will definitely  be                                                               
demand.   The  question is  regarding what  is the  most economic                                                               
source, Alaska gas or LNG.                                                                                                      
                                                                                                                                
REPRESENTATIVE NEUMAN asked specifically  if there will be enough                                                               
demand to use Alaska's gas.                                                                                                     
                                                                                                                                
MS.  ADAIR answered  that the  best  information available  today                                                               
says  that there  will  be  enough demand  to  use Alaska's  gas.                                                               
However, there is  always the possibility that  prices could rise                                                               
so high that  the elasticity of demand would  result in customers                                                               
cutting  back  as  was  recently  seen in  Juneau.    Ms.  Adair,                                                               
returning to the presentation and  slide 47 titled "Evaluation of                                                               
Natural Gas  Storage and  Outlook," said that  there have  been a                                                               
lot of gas  storage projects developed in the U.S.  over the last                                                               
five  years.   The reason  for that  is as  the U.S.  relies more                                                               
heavily  on  imported  supplies and  supplies  that  are  located                                                               
farther and  farther from the  large demand centers,  gas storage                                                               
helps  balance out  the available  supply  through the  pipelines                                                               
with  the   instantaneous  demand   in  the   large-use  markets.                                                               
TransCanada's  two  projects  are   well  positioned  to  do  the                                                               
aforementioned.   Those  two projects  have  been profitable  and                                                               
provide  a vital  service to  the region,  which she  opined will                                                               
continue.   Furthermore, the  future demand  for storage  will be                                                               
good as gas supplies and  development occur farther away from the                                                               
demand centers.                                                                                                                 
                                                                                                                                
9:26:11 AM                                                                                                                    
                                                                                                                                
MS. ADAIR  reviewed slide 49  titled "TransCanada's  Canadian Gas                                                               
Assets   Without  Alaska   Gas  Supply"   and  slide   50  titled                                                               
"TransCanada's Canadian  Gas Assets  With Alaska Gas  Supply." As                                                               
the chart on  slide 50 relates, the Alaska gas  supply provides a                                                               
significant increase in net income.                                                                                             
                                                                                                                                
9:28:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO, referring  to the chart on  slide 50, asked                                                               
if the y-axis  that is labeled "Millions of  U.S. Dollars" refers                                                               
to the tariff on the pipe or value.                                                                                             
                                                                                                                                
MS. ADAIR  responded that it  refers to  value, net income.   She                                                               
explained that it's taking the  tariff as revenue and netting out                                                               
TransCanada's costs.                                                                                                            
                                                                                                                                
REPRESENTATIVE GATTO surmised, then,  that the chart projects out                                                               
to 2028  as if the price  of gas in the  year 2028 is known.   He                                                               
characterized that as "quite  the prediction," particularly given                                                               
the view that nothing counts more than the price of gas.                                                                        
                                                                                                                                
MS.  ADAIR clarified  that the  chart  is relating  TransCanada's                                                               
service.   She explained  that TransCanada  doesn't own  gas, and                                                               
therefore the chart shows the  revenue TransCanada would generate                                                               
from  operating the  pipeline.   She further  clarified that  the                                                               
chart relates tariffs net of cost.                                                                                              
                                                                                                                                
9:29:51 AM                                                                                                                    
                                                                                                                                
MS. ADAIR,  referring to slide  53 titled "TransCanada  Other Gas                                                               
Pipeline  Assets," noted  that some  of TransCanada's  assets are                                                               
integrated  with the  Canadian  assets.   She  then informed  the                                                               
committee  that in  2007  TransCanada acquired  ANR,  which is  a                                                               
large system that transports gas from  the U.S. Gulf Coast to the                                                               
Midwest.  Ms. Adair characterized ANR  as a great asset that also                                                               
provides useful  storage.   The GTN  System links  Foothills Pipe                                                               
Lines Ltd. ("Foothills") and moves gas  south out of Mexico.  The                                                               
Great Lakes  also serves  through the  Midwestern U.S.   Iroquois                                                               
delivers gas from  the Canadian Mainline to New York  State.  She                                                               
also  mentioned the  Portland,  Tamazunchale,  Transgas, and  Gas                                                               
Pacific projects.   The  aforementioned projects  illustrate that                                                               
there are lots of gas transportation assets in the portfolio.                                                                   
                                                                                                                                
9:31:12 AM                                                                                                                    
                                                                                                                                
SENATOR THERRIAULT recalled slide  29, which refers to supporting                                                               
the  expected supply  shortfall in  petrochemical feedstock.   He                                                               
inquired as to what petrochemical is being referenced.                                                                          
                                                                                                                                
MS. ADAIR said that it's referring  to the ethane demand.  Ethane                                                               
crackers and  derivative chemicals  manufacturing in Canada.   In                                                               
further response, Ms.  Adair clarified that it was  meant to say:                                                               
"If  the Alaska  gas  comes in,  that's one  of  the things  that                                                               
flowing that  gas through  TransCanada would  give you  access to                                                               
those markets."                                                                                                                 
                                                                                                                                
SENATOR THERRIAULT then  turned attention to slide  53, and noted                                                               
that  some have  said that  the  Alaska pipeline  will swamp  the                                                               
market,       and       it       would      be       a       poor                                                               
business  decision for  TransCanada  to develop  a pipeline  that                                                               
kills the  market for  one of  its other  assets.   Therefore, he                                                               
requested that Ms. Adair discuss  overall demand and whether this                                                               
business enterprise places any other  branch of the enterprise at                                                               
risk of losing the market.                                                                                                      
                                                                                                                                
MS. ADAIR explained that with  the available capacity of 11 Bcf/d                                                               
at  the  Alberta  Hub  there  isn't much  of  a  bottleneck  once                                                               
Alaska's gas is laid in.  She  pointed out that is looking at the                                                               
take-                                                                                                                           
away capacity today coming out of  the hub and connecting to some                                                               
of the  different pipelines  for distribution  of gas.   Although                                                               
there  may be  a  few  pinch points,  the  capacity  seems to  be                                                               
adequate.   However, there may be  issues with a gas  system like                                                               
ANR  as  there  may  be  gas   on  gas  competition.    When  the                                                               
aforementioned  happens, typically  the market  redistributes the                                                               
gas such that some of the ANR  gas jumps off the system and flows                                                               
east sooner while pushing imports out from the East Coast.                                                                      
                                                                                                                                
9:34:07 AM                                                                                                                    
                                                                                                                                
MS. ADAIR moves  on to slide 55 titled  "Power Segment Overview,"                                                               
which  specifies  the  locations  of  all  the  power  generation                                                               
facilities in TransCanada's portfolio.   TransCanada has a lot of                                                               
assets in Alberta and the U.S.  Northeast.  When it comes to fuel                                                               
sources for generation, TransCanada has  a lot of diversity.  She                                                               
pointed  out  that  TransCanada's portfolio  even  includes  some                                                               
wind,  hydro, and  nuclear power.   To  the extent  TransCanada's                                                               
assets  are  natural gas,  those  assets  tie  in well  with  the                                                               
natural gas  transmission and storage  business the  company has.                                                               
She  noted   that  the  appendix   includes  a  summary   of  the                                                               
characteristics of the various markets.   TransCanada does have a                                                               
lot of  power development projects  in its  formula as well.   In                                                               
fact,  as  related   by  slide  58  titled   "Power  Projects  in                                                               
Development," TransCanada  has four  good size  projects underway                                                               
with several  in the development  phase.  Some of  those projects                                                               
tie  into  existing  [projects].    Three  projects  are  in  the                                                               
advanced  development stage  such that  the company  is close  to                                                               
committing capital for them.                                                                                                    
                                                                                                                                
9:35:45 AM                                                                                                                    
                                                                                                                                
MS. ADAIR,  referring to slide 59  titled "TransCanada's Keystone                                                               
Crude Pipeline Project," related that  Keystone will be the first                                                               
crude  oil pipeline  in  the  portfolio.   The  initial phase  of                                                               
435,000 barrels  a day  is to  be expanded  to 590,000  barrels a                                                               
day.   [Shippers] have already  subscribed for 495,000  barrels a                                                               
day of  capacity with an  18-year contract life.   ConocoPhillips                                                               
is a  partner with TransCanada.   As  related by slide  59 titled                                                               
"TransCanada's  Keystone  Crude  Pipeline Project,"  the  project                                                               
should be in service by the end of 2009.                                                                                        
                                                                                                                                
MS.   ADAIR,  referring   to  slide   60  titled   "LNG  Terminal                                                               
Development   Assessment  of   Projects  (continued),"   reminded                                                               
members that  in late 2000 and  early 2001 gas prices  spiked and                                                               
there were  a large number of  LNG projects announced.   In fact,                                                               
she  recalled the  announcement of  the construction  of over  30                                                               
projects in  the U.S. in  which import terminals were  built with                                                               
the hope that people would deliver  LNG as well as terminals that                                                               
were  aligned with  large gas  deposits overseas.   However,  the                                                               
aforementioned never  happened.   There are  two new  projects on                                                               
the U.S. Gulf  Coast.  Although there haven't been  a huge amount                                                               
of LNG imports,  TransCanada has announced the  following two LNG                                                               
terminal  development projects:   Broadwater  Energy and  Cacouna                                                               
Energy.    Broadwater  Energy, in  particular,  has  some  fairly                                                               
compelling  economics because  it  will be  able  to address  the                                                               
large capacity  constraint issues  for those  going into  the New                                                               
York -  Connecticut area  markets.   The Quebec  project, Cacouna                                                               
Energy, is stalled at the moment.                                                                                               
                                                                                                                                
MS. ADAIR opined that LNG  terminal development has been impacted                                                               
by capital cost escalation, uncertainty  of available gas supply,                                                               
public  opposition   to  terminal   site  development,   and  the                                                               
inability to obtain  commitment from foreign reserves  to the LNG                                                               
projects.  The  U.S. natural gas prices, she  noted, haven't been                                                               
high  enough to  induce a  lot of  gas to  come this  way on  the                                                               
water.                                                                                                                          
                                                                                                                                
9:39:24 AM                                                                                                                    
                                                                                                                                
MS.  ADAIR, referring  to  slide 63  titled  "North American  Gas                                                               
Supply and Demand Impacts on  TransCanada," related, in regard to                                                               
ANR [development along the U.S.  Gulf Coast], that there has been                                                               
a longer lead time on  deep water development.  Furthermore, from                                                               
a  supply standpoint  ANR has  experienced  development that  has                                                               
been farther west or farther east  in the Gulf of Mexico relative                                                               
to  the ANR  mainline.   However,  ANR is  well  located to  take                                                               
supplies from these new shale  plays, including the Barnett shale                                                               
and the  Louisiana shale  plays.   Therefore, she  expected ANR's                                                               
supply basins  to shift from the  Gulf of Mexico to  shale in the                                                               
future.   There  is reserve  development and  competition in  the                                                               
U.S. Rocky  Mountains.  When more  gas comes from the  U.S. Rocky                                                               
Mountains  it will  compete with  gas from  elsewhere, which  may                                                               
result in  gas-on-gas competition and reshuffling  in traditional                                                               
supply patterns.                                                                                                                
                                                                                                                                
MS. ADAIR opined that LNG  terminal development will continue and                                                               
will likely be  in niche locations and serve  specific markets or                                                               
along the  U.S. Gulf  Coast.   Over time  there will  probably be                                                               
plenty of capacity  available for that, although most  of it will                                                               
likely be on the  U.S. Gulf Coast.  The impact on  ANR may not be                                                               
large as  ANR turns  more to shale  gas.   Furthermore, depending                                                               
upon   the   location   of   the    terminals,   some   gas   may                                                               
switch  to  ANR as  capacity  in  the  east  is filled  with  LNG                                                               
supplies.                                                                                                                       
                                                                                                                                
9:42:43 AM                                                                                                                    
                                                                                                                                
MS. ADAIR,  referring to  slide 65 titled  "Impact of  Alaska Gas                                                               
Supply   on  TransCanada's   Future   Earnings,"  discussed   the                                                               
potential  financing,   debt  and   equity,  return   on  equity.                                                               
Financing  should be  available  for the  Alaska gasline  project                                                               
assuming sufficient risk allocation  to other parties and barring                                                               
unforeseen environmental  credit constraints.  However,  the risk                                                               
must be  allocated such  that credit  risk would  go to  the firm                                                               
transportation   (FT)  shippers.     She   then  emphasized   the                                                               
importance of the health of the  capital markets.  With regard to                                                               
debt  and equity,  TransCanada has  a demonstrated  track record.                                                               
She mentioned  that TransCanada may  take on partners,  which can                                                               
enhance  the value  of  the  project.   In  fact, sometimes  debt                                                               
holders encourage  such.  She  highlighted that  the availability                                                               
of non-recourse project  debt will be a function  of project risk                                                               
allocation  and how  it's viewed  by debt  holders.   However, no                                                               
matter who the  project developer is, there will be  a high level                                                               
of risk management and allocation.                                                                                              
                                                                                                                                
MS. ADAIR, referring  to slide 66 titled  "Alaska Project Capital                                                               
Requirements," emphasized  the importance  of realizing  that the                                                               
check isn't  written on the  first day  but rather the  funds are                                                               
spent over time.   Slide 66 illustrates a profile  of the capital                                                               
requirements, excluding the  [gas treatment plant] GTP.   The GTP                                                               
will likely  come into play  during the last  year or two  of the                                                               
build.                                                                                                                          
                                                                                                                                
9:46:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN referred  to slide  65, which  relates the                                                               
assumption  that there  is sufficient  risk  allocation to  other                                                               
parties.   He  then  inquired as  to  the incentives  TransCanada                                                               
would offer to the other parties  and who would the other parties                                                               
be.                                                                                                                             
                                                                                                                                
MS. ADAIR said  that usually it's part of the  negotiation.  When                                                               
an entity prepares to build  a project, request for proposals are                                                               
issued to different people for  different aspects of the project.                                                               
Part of the commercial terms will  be the allocation of risk.  In                                                               
further response  to Representative  Neuman, Ms.  Adair specified                                                               
that  one   of  those  parties   would  be  an   engineering  and                                                               
construction  contractor.   She reiterated  that typically  [risk                                                               
allocation] is part of the negotiated commercial terms.                                                                         
                                                                                                                                
9:47:32 AM                                                                                                                    
                                                                                                                                
MS. ADAIR  returned to her  presentation.  Referring to  slide 67                                                               
titled  "TransCanada Financial  Forecast," she  relayed that  the                                                               
Canadian  pipelines and  U.S. pipelines  are reviewed  separately                                                               
while  taking into  account the  difference in  the two  markets.                                                               
The  financial forecast  would review  a forecast  of the  energy                                                               
segment  of  the business  while  also  taking into  account  the                                                               
current projects as well as  those in construction.  The forecast                                                               
would  recognize  the  future  for   development  and  take  into                                                               
account  Keystone, Mackenzie  gas, and  any LNG  development.   A                                                               
forecast  based on  the aforementioned  elements resulted  in the                                                               
forecast presented on slide 68  titled "Net Income Without Alaska                                                               
Gas."  Slide  69 titled "Net Income With  Alaska Gas" illustrates                                                               
that  the addition  of the  Alaska gas  pipeline is  significant,                                                               
although it's  not as  significant as when  only compared  to the                                                               
earnings of the Canadian gas assets.                                                                                            
                                                                                                                                
9:49:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES asked  whether the chart on  slide 69, which                                                               
is  a  TransCanada  projection  with  Alaska  gas,  includes  the                                                               
decrease  in  tariff  in  the   Canadian  portion  of  the  lines                                                               
TransCanada  owns.    He  related  his  understanding  that  once                                                               
Alaska's volumes  come in,  it raises the  capacity and  thus the                                                               
tariffs decrease.   Is the aforementioned included  in the chart,                                                               
he asked.                                                                                                                       
                                                                                                                                
MS. ADAIR said  that should be included because a  volume kick is                                                               
included;  there  is additional  volume  but  a decrease  in  the                                                               
tariff.                                                                                                                         
                                                                                                                                
9:49:48 AM                                                                                                                    
                                                                                                                                
SENATOR  THERRIAULT recalled  that although  there has  been some                                                               
concern with  regard to TransCanada's  ability to  participate in                                                               
this project, Ms.  Adair related yesterday that  TransCanada is a                                                               
sound,  capable  company  that could  participate.    He  further                                                               
recalled hearing  last week that  although the project  taxes the                                                               
company while it's in development, it strengthens the company.                                                                  
                                                                                                                                
MS. ADAIR confirmed that to be  the case, adding that the company                                                               
receives  a  significant  contribution  in net  income  from  the                                                               
project.  She  then opined that this is a  huge project that will                                                               
stress any [company].                                                                                                           
                                                                                                                                
REPRESENTATIVE GATTO  observed that the net  income declines from                                                               
the first gas  as the project proceeds, and yet  some of the debt                                                               
is being paid back.  Therefore,  he questioned why the net income                                                               
declines rather than grows.                                                                                                     
                                                                                                                                
MS.  ADAIR explained  that the  net income  is declining  because                                                               
there is probably  some long-term decline in the  numbers.  Also,                                                               
there is  going to be  an increase  in operating cost  over time.                                                               
Furthermore, if the  tariff is a negotiated rate,  there might be                                                               
some "squeezing" in the margin.   She reminded members that [this                                                               
analysis] is  being performed at  a very high level  without much                                                               
detail.   She  suggested that  Mr.  Pulliam likely  has a  better                                                               
forecast of that  number.  In further  response to Representative                                                               
Gatto, Ms.  Adair reminded the  members that  TransCanada doesn't                                                               
own any gas and thus it's only tariff revenue and costs.                                                                        
                                                                                                                                
9:51:39 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY,  recalling  Ms. Adair's  comments  on  the                                                               
Ravenswood project, said that he  took away a more negative slant                                                               
than  from  the  [administration's presentations]  in  Anchorage.                                                               
However,  he related  his understanding  from  reading about  the                                                               
project that when  the new asset was added, the  credit watch was                                                               
normal for the  size of the acquisition.  He  asked if the intent                                                               
was  for  there  to  be  a  more  negative  presentation  of  the                                                               
Ravenswood project than occurred at the Anchorage presentations.                                                                
                                                                                                                                
MS.  ADAIR said  that since  she  wasn't in  Anchorage, and  thus                                                               
couldn't  comment on  that point.   However,  she confirmed  that                                                               
Ravenswood  is  a  sizable  project  for  [TransCanada]  and  the                                                               
initial read  is that the  project isn't as  good as some  of the                                                               
other projects TransCanada  has taken.  She opined,  "The jury is                                                               
out ...  to wait  and see  what TransCanada is  going to  do with                                                               
this  asset."   She mentioned  that  there are  some options  for                                                               
repowering  [Ravenswood] and  making  it  more efficient,  things                                                               
that could enhance the value of it over time.                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLY  asked  whether  TransCanada  is  sorry  it                                                               
acquired that asset.                                                                                                            
                                                                                                                                
MS. ADAIR deferred to TransCanada.                                                                                              
                                                                                                                                
DAN  DICKINSON, Certified  Public  Accountant (CPA),  Consultant,                                                               
Legislative   Budget   and    Audit   Committee,   Alaska   State                                                               
Legislature,  offered his  understanding  that  in Anchorage  the                                                               
administration  was  discussing  specifically the  credit  issues                                                               
while  Ms.  Adair  was  discussing the  response  in  the  equity                                                               
markets.                                                                                                                        
                                                                                                                                
MS. ADAIR reiterated  her earlier comment that the  jury is still                                                               
out  on  the Ravenswood  project  because  it depends  upon  what                                                               
TransCanada does  with that  asset.  She  offered that  her power                                                               
people  in Houston,  Texas, believe  that the  Ravenswood project                                                               
may be  dilutive to  earnings in the  beginning.   However, there                                                               
are  options  to  enhance  the  value of  that  project  and  the                                                               
location is fantastic.                                                                                                          
                                                                                                                                
REPRESENTATIVE  KELLY   expressed  the   desire  to   review  the                                                               
Ravenswood project more.                                                                                                        
                                                                                                                                
9:54:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER expressed  concern  about  what he  termed                                                               
"false precision"  that is built  into these  conversations; that                                                               
is the  presumption that  what is presented  in these  charts and                                                               
graphs will occur.  He pointed  out that Ms. Adair isn't privy to                                                               
the private corporate financial  information, and therefore these                                                               
are an  outsider's estimate  of a linear  projection.   There has                                                               
been  some  controversy  over  the  issue  of  the  past  partner                                                               
liability.  What has been quantified  by some to be $8-$9 billion                                                               
of liability  was minimized by  the attorneys last week  who said                                                               
that  it's not  a  real  risk.   Therefore,  he  opined that  the                                                               
situation is headed for a cataclysmic  legal debate.  He asked if                                                               
any such cost contingencies have  been included in Muse Stancil's                                                               
cost projections.                                                                                                               
                                                                                                                                
MS. ADAIR replied no.                                                                                                           
                                                                                                                                
9:56:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN  asked whether TransCanada would  be on the                                                               
state's list of companies to  consider hiring to build the Alaska                                                               
gas  pipeline.   He further  asked  if there's  a better  partner                                                               
available.                                                                                                                      
                                                                                                                                
MS. ADAIR, speaking  from the perspective of  a project engineer,                                                               
said that  generally she doesn't  rank those from whom  she would                                                               
consider  request  for  proposals  (RFPs)  until  the  commercial                                                               
proposal  is available.   Ms.  Adair answered  that she  believes                                                               
TransCanada  would be  on the  list, especially  in light  of the                                                               
markets the  state is trying  to serve as  well as the  fact that                                                               
TransCanada  has  existing   assets  geographically  situated  to                                                               
reduce the cost of the build to get the gas to the Lower 48.                                                                    
                                                                                                                                
9:58:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  asked whether  BP and  ConocoPhillips, as                                                               
was related  yesterday about TransCanada, already  have assets in                                                               
Canada and the Lower 48 that would benefit this project.                                                                        
                                                                                                                                
MS. ADAIR responded not that readily  come to mind.  However, she                                                               
acknowledged that BP and ConocoPhillips  have production in these                                                               
areas  and are  shippers.   She recalled  that there  has been  a                                                               
question  as to  how  much  gas ConocoPhillips  and  BP own  that                                                               
already  moves on  TransCanada's system.   Although  she couldn't                                                               
readily foresee  a large asset  that BP and  ConocoPhillips could                                                               
attach to the downstream side, on  the upstream side there may be                                                               
integration  opportunities with  existing  facilities at  Prudhoe                                                               
Bay.  For  example, compression and treating can  result in added                                                               
value and reduce the overall risk and cost of the project.                                                                      
                                                                                                                                
9:59:51 AM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI asked  whether Ms. Adair can  give any value                                                               
to TransCanada's  claim that it  has the rights-of-way.   He also                                                               
inquired as  to TransCanada's relationships  in dealing  with the                                                               
First Nations in the past.                                                                                                      
                                                                                                                                
MS. ADAIR said she doesn't have any personal knowledge on that.                                                                 
                                                                                                                                
10:00:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GARA  questioned whether  ExxonMobil  Corporation                                                               
("ExxonMobil"), ConocoPhillips, and BP,  who hold the gas leases,                                                               
are negotiating  by sending  a message  that they  might withhold                                                               
their  gas   from  an  independent  pipeline   project,  such  as                                                               
TransCanada's  project.     He  asked  if  there   is  any  other                                                               
circumstance in  the world  in which those  holding the  gas have                                                               
tried to withhold it from an existing pipeline.                                                                                 
                                                                                                                                
MS. ADAIR replied no, adding that  she couldn't think of any such                                                               
situation off the top of her head.                                                                                              
                                                                                                                                
REPRESENTATIVE GARA surmised then that  whenever there has been a                                                               
pipeline in other  parts of the world,  companies have eventually                                                               
sold their  gas.  Therefore, he  asked if one could  surmise that                                                               
would occur in Alaska as well.                                                                                                  
                                                                                                                                
MS. ADAIR  cautioned against assuming  that such happens  all the                                                               
time.    She  offered  that   generally  it's  not  uncommon  for                                                               
producers to review  different options.  In fact,  she recalled a                                                               
case in  southwestern Wyoming where,  because of timing  and cost                                                               
issues associated with the project,  two companies built separate                                                               
facilities.                                                                                                                     
                                                                                                                                
10:02:41 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  recalled his  involvement in  the six-year                                                               
process that has culminated into  where the legislature is today.                                                               
The presentations  thus far seem  to indicate to the  public that                                                               
there are only two choices.   He then asked if TransCanada is the                                                               
only entity that has Canadian assets  that could be used to bring                                                               
Alaska's gas to market.                                                                                                         
                                                                                                                                
MS.  ADAIR ventured  that if  one were  to look  at TransCanada's                                                               
portfolio  in  Canada,  particularly  through  the  Alberta  Hub,                                                               
TransCanada is the best existing  entity.  However, that's not to                                                               
say that  there aren't  new build opportunities  or ways  to move                                                               
part  of the  gas  on TransCanada  and use  other  options.   She                                                               
opined that  it depends upon  all of the  commercial alternatives                                                               
and their  ranking, while taking  into account which  markets are                                                               
desired  and  the  best economic  solution  given  the  available                                                               
capital and  time.  A  great thing about TransCanada's  assets is                                                               
that  many  of  them  are  already in  the  ground.    Therefore,                                                               
TransCanada is probably at the top of the list.                                                                                 
                                                                                                                                
10:05:35 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG,  recalling that Ms. Adair  has already                                                               
testified that  TransCanada is capable  of doing  the engineering                                                               
of this project, asked if  TransCanada is capable of pulling this                                                               
off in terms of the financial obligations and technicalities.                                                                   
                                                                                                                                
MS. ADAIR surmised that whoever  manages the project will have to                                                               
go outside and pull together  sufficient human capital.  The size                                                               
of the project would likely  overload any [company], particularly                                                               
in  light  of the  fact  that  the  oil  industry is  very  busy.                                                               
Although  TransCanada  has  many  core competencies  as  well  as                                                               
experience in  cold environments,  likely all of  the engineering                                                               
and construction  will be done by  third parties.  The  key is in                                                               
how  those   contracts  are  negotiated  and   structured.    She                                                               
predicted  that   there  will  be  more   than  one  construction                                                               
contractor   and  perhaps   even   more   than  one   engineering                                                               
contractor.     Therefore,  the  large  issue   for  the  project                                                               
developer  is  being  able  to   negotiate  and  manage  all  the                                                               
contracts to execute the project.                                                                                               
                                                                                                                                
REPRESENTATIVE GUTTENBERG said that  he saw TransCanada's ability                                                               
to negotiate both regulatory agencies as an asset.                                                                              
                                                                                                                                
MS. ADAIR acknowledged that TransCanada  has experience with both                                                               
regulatory officials.                                                                                                           
                                                                                                                                
10:08:37 AM                                                                                                                   
                                                                                                                                
SENATOR BUNDE said  that if he were the producers,  it would seem                                                               
logical to want  to have some vertical integration  in order that                                                               
the  producer could  be a  producer,  shipper, and  owner of  the                                                               
pipeline.   The aforementioned, he noted,  is basically happening                                                               
with  the Trans-Alaska  Pipeline System  (TAPS) now.   In  such a                                                               
situation the producers would be  strongly motivated to eliminate                                                               
other  competition  in order  to  have  vertical integration  and                                                               
increase the  bottom line.   He asked if  there is a  scenario in                                                               
which it would be more  advantageous for a producer's bottom line                                                               
to  deal with  a  pipeline  company rather  than  create its  own                                                               
pipeline company.                                                                                                               
                                                                                                                                
MS. ADAIR highlighted the complexities  of the commercial aspects                                                               
of operating pipeline companies.   For example, accounting, fuel,                                                               
keeping up  with the  tariffs, ownership,  and allocation  of gas                                                               
requires much  "back room  infrastructure."   To the  extent that                                                               
someone could be hired to do  that and spread those costs for the                                                               
systems and  the people over a  lot of volume is  really helpful.                                                               
Also, to the extent that  these are common carrier systems, there                                                               
isn't  the  opportunity  to  block  out  the  competition.    She                                                               
informed  the   members  that   the  Federal   Energy  Regulatory                                                               
Commission  (FERC)  ensures that  there  is  open access  to  the                                                               
pipeline and  thus a common carrier  has to let in  others.  Most                                                               
oil companies recognize  that and account for and  leave room for                                                               
those common carrier  systems because they don't want  to be tied                                                               
up with all the accompanying  legal matters.  Therefore, she said                                                               
she didn't believe  that's much of an issue.   From an operations                                                               
standpoint,  it  can  be  helpful  to  integrate  operations  for                                                               
operating personnel, safety,  maintenance coordination, and other                                                               
such  day-to-day operations.    However,  all the  aforementioned                                                               
commercial matters  have to  be taken  care of as  well.   If the                                                               
company  doesn't  already  do  that  and  doesn't  have  a  large                                                               
operation to  do so,  it might  be better  to let  another entity                                                               
take care of the commercial details.                                                                                            
                                                                                                                                
10:12:01 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE NEUMAN asked  whether it would even be  a "blip in                                                               
the screen" if  Alaska were able to attract an  industry to build                                                               
a gas-to-liquids (GTL) processing plant.   He then inquired as to                                                               
how Alaska's  finances would be  impacted by a  proposed gasline,                                                               
including  the  added-value   products.    Representative  Neuman                                                               
related his  understanding that the  GTLs are much  more valuable                                                               
than the methanes or other components.                                                                                          
                                                                                                                                
MS. ADAIR,  referring to what  she termed the  multiplier effect,                                                               
said she can't address the number  of jobs that would be created.                                                               
However, she informed  the committee that several  years ago Muse                                                               
Stancil did  perform a study  that reviewed  alternatives besides                                                               
shipping the gas to Alberta.   Although a small percentage of the                                                               
volume is  taken out in terms  of the liquids, it  overwhelms the                                                               
demand in Alaska.  Therefore, there  has to be a determination as                                                               
to whether  those will be  recovered in  Alaska.  To  make retail                                                               
products, it's  a huge capital  investment and then it  still has                                                               
to be  exported.  She remarked  that if only natural  gas liquids                                                               
are going  to be made, perhaps  there's a scenario by  which some                                                               
of those  can go down  TAPS.  The aforementioned  would, however,                                                               
require a determination as to which  can be kept, how they can be                                                               
stored  and exported  as opposed  to letting  those liquids  pass                                                               
through the  pipeline and transferred  to a point at  which there                                                               
is an existing world scale  petrochemical industry that wants the                                                               
product.   The economic analysis  revealed, she related,  that it                                                               
makes more  sense for those who  own the liquids to  take them to                                                               
the existing markets.                                                                                                           
                                                                                                                                
MS.  ADAIR,  regarding   TransCanada's  earnings  for  [liquefied                                                               
propane gas] LPG or [natural  gas liquids] NGLs, pointed out that                                                               
TransCanada doesn't  own the  liquids but  rather they  belong to                                                               
the  shippers.   Therefore, each  individual shipper  can make  a                                                               
decision for its own account regarding  what to do with the NGLs.                                                               
She reminded the members that if  the state wants to process some                                                               
of the  gas and  recover liquids  for in-state  use, it  could be                                                               
done  and the  rest  of the  producers could  ship  their gas  to                                                               
existing facilities in Alberta.                                                                                                 
                                                                                                                                
10:16:13 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   NEUMAN   highlighted   that  the   Ted   Stevens                                                               
International Airport  is the busiest freight  airport in America                                                               
and the  third busiest in the  world.  Therefore, Alaska  is in a                                                               
position to export those gas  liquids [to Alberta].  He indicated                                                               
that [the  exportation] offers  the development  of jobs  and the                                                               
ability for  Alaska to expand  its dependence from more  than one                                                               
pipeline  for 90  percent of  its resources.   He  requested that                                                               
such be reviewed.                                                                                                               
                                                                                                                                
SENATOR STEDMAN  offered that there  was quite a  discussion over                                                               
the past few  years on the common carrier issue  and dealing with                                                               
gaslines rather than oil lines.                                                                                                 
                                                                                                                                
MS. ADAIR  relayed that  her experience  is as  a producer  and a                                                               
shipper.  When  there is open access and  parties have difficulty                                                               
entering, they  can appeal to  FERC.   The purpose of  the common                                                               
carrier system is  to make capacity available to everyone.   If a                                                               
system  is   oversubscribed,  capacity  is  allocated   based  on                                                               
nominations.   The  actual details  of the  process are  probably                                                               
best addressed by FERC representatives.                                                                                         
                                                                                                                                
SENATOR  STEDMAN surmised,  then,  that FERC  would control  that                                                               
rather than the oil company.                                                                                                    
                                                                                                                                
MS. ADAIR said  that typically the operator of  the pipeline will                                                               
publish  tariffs as  set  out in  the tariff  document.   If  the                                                               
pipeline is  not complying with  its published tariff or  if it's                                                               
viewed as  restrictive in  terms of  competition, appeals  can be                                                               
made to FERC to change the tariffs and create access.                                                                           
                                                                                                                                
10:19:15 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  related his understanding that  under AGIA                                                               
and this contract proposal, there's  a requirement that every two                                                               
years  [the  company]  will  solicit   and  will  expand  to  any                                                               
reasonable engineering  increment without going through  the FERC                                                               
process.   "That term is  not contained in any  non-AGIA pipeline                                                               
proposal.   And is that correct  so that there is  ... a definite                                                               
difference  between  having to  ...  have  a new  supplier  going                                                               
through  FERC for  a mandatory  requirement for  expansion versus                                                               
AGIA that has a requirement that  this proposal had to have those                                                               
voluntarily done," he asked.                                                                                                    
                                                                                                                                
10:20:32 AM                                                                                                                   
                                                                                                                                
JOHN NERI, PhD, Consultant, Benjamin  Schlesinger & Assoc., Inc.,                                                               
clarified that  natural gas pipelines are  contract carriers, and                                                               
therefore  the  shippers  enter   into  long-term  contracts  and                                                               
reserve  capacity on  the  pipeline.   With  respect to  pipeline                                                               
expansions  under  the  Alaska  legislation,  he  said  FERC  can                                                               
require the  Alaska pipeline  to expand if  there is  interest on                                                               
the  part of  the shippers.   However,  that's not  generally the                                                               
FERC policy.  He related  his understanding that the overall FERC                                                               
policy doesn't require pipelines to expand.                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON pointed  out that  under the  AGIA process                                                               
there  was a  provision that  the pipeline  would have  to expand                                                               
under any  reasonable economic or engineering  expansion proposal                                                               
and  there would  have  to  be a  solicitation  every two  years.                                                               
Although  under FERC  for a  normal  pipeline, there  could be  a                                                               
request for a  mandatory expansion, which could be  a much longer                                                               
process than  the voluntary  expansion required  under AGIA.   He                                                               
asked if Dr. Neri understands the situation in the same way.                                                                    
                                                                                                                                
DR. NERI offered his understanding  that under AGIA, the pipeline                                                               
is [required]  to test the  market every  two years by  having an                                                               
open season.   The open  season is basically the  pipeline asking                                                               
shippers if  there is any interest  in expanding the system.   If                                                               
there  is  interest,  the  FERC  will  go  through  the  standard                                                               
certificate  process.   The pipeline  would  present a  proposal,                                                               
hold  an open  season, enter  into contracts  with the  expansion                                                               
shippers, and  then the  pipeline would  file an  application for                                                               
certificate  at the  FERC.   The  only difference  is that  under                                                               
AGIA,  the pipeline  is required  to  test the  market every  two                                                               
years.                                                                                                                          
                                                                                                                                
10:23:25 AM                                                                                                                   
                                                                                                                                
SENATOR  THERRIAULT  noted  that  Ms. Adair  is  using  the  term                                                               
"common carrier" and a few  other terms that seem more applicable                                                               
to an  oil pipeline not  a gas pipeline.   He further  noted that                                                               
there  are fundamental  differences in  the way  an oil  pipeline                                                               
versus a gas pipeline work.                                                                                                     
                                                                                                                                
MS. ADAIR concurred.                                                                                                            
                                                                                                                                
SENATOR THERRIAULT,  recalling yesterday's testimony,  said, "The                                                               
net present value  (NPV) of the ... potential up  to $500 million                                                               
contribution that  the state gets,  just in the reduction  of the                                                               
tariff  that has  a net  present value  to the  State of  Alaska,                                                               
we'll actually  make money on  that."   With regard to  the other                                                               
must-haves, such  as expansions, he  said, "The fact that  if ...                                                               
there  is a  request  for an  expansion,  but contractually  this                                                               
pipeline  will   be  at  FERC   supporting  the   expansion,  not                                                               
contesting it."  He noted that  since there can be an application                                                               
to the  FERC, there can  be opposition to it.   The hope  is that                                                               
the  pipeline wouldn't  do that  under  AGIA.   He asked  whether                                                               
there is separate value to that  beyond the NPV received from the                                                               
reduction of the tariff.                                                                                                        
                                                                                                                                
MS. ADAIR surmised that would best  be answered by Mr. Pulliam as                                                               
he has performed more modeling of the pipeline economics.                                                                       
                                                                                                                                
10:25:05 AM                                                                                                                   
                                                                                                                                
BARRY PULLIAM, Consultant, Econ  One Research, Inc., relayed that                                                               
the value obtained  from the tariff reduction on  $500 million is                                                               
about $.05 per thousands thousand  British thermal units (MMBtu).                                                               
Under AGIA, one  must solicit bids for expansion,  and if there's                                                               
[room  for  expansion]  AGIA  requires  expansion  in  reasonable                                                               
economic  increments,  assuming  the contracts  required  can  be                                                               
obtained  on a  rolled-in basis.   He  related his  understanding                                                               
that under  a normal situation,  FERC wouldn't require  either of                                                               
the  aforementioned.    Furthermore, FERC  wouldn't  require  the                                                               
pipeline [owner]  to affirmatively go  forth and offer  to expand                                                               
whereas that's one  of the things accomplished under  AGIA.  From                                                               
a  pipeline  standpoint, the  pipeline  is  interested in  making                                                               
money, which  it does by  getting gas  down the pipe  to increase                                                               
revenues.  Therefore, pipeline  [owners] are generally interested                                                               
in  expansion so  long as  it's revenue  enhancing.   Mr. Pulliam                                                               
identified  the  difference under  AGIA  as  the fact  that  [the                                                               
expansion process] is an automatic  process versus having to seek                                                               
it separately through FERC.                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT acknowledged  that  the return  to the  state                                                               
from the reduction in the tariff  can be quantified.  However, he                                                               
surmised  that the  state,  as a  sovereign,  is receiving  other                                                               
things of value to which a dollar amount can't be assigned.                                                                     
                                                                                                                                
MR.  PULLIAM  opined  that  such  things  would  fall  under  the                                                               
category of  intangibles.  Scenarios  could be offered  and there                                                               
could be attempts to quantify  them.  Assuming that the expansion                                                               
was economic,  but the pipeline  [owners] were resisting  it, one                                                               
could  quantify  the value  of  having  the automatic  expansion.                                                               
Without those base assumptions, they're intangibles.                                                                            
                                                                                                                                
10:28:02 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SAMUELS  related that Shell, for  instance, in the                                                               
Beaufort  Sea could  have exploration  offshore that's  very good                                                               
for the private sector.  However,  if the expansion for Shell gas                                                               
resulted in  an increase in  the tariff, the state's  royalty gas                                                               
could potentially  be worth less.   He asked if it's  possible to                                                               
run models on the various  different scenarios that would provide                                                               
value to the legislature.                                                                                                       
                                                                                                                                
MR. PULLIAM said that although it  may be of some value, it would                                                               
require a large  effort.  The results will be  dependent upon the                                                               
assumptions of  the gas  that's put  in the pipe.   He  noted his                                                               
agreement with Representative Samuels that  if the gas is largely                                                               
offshore  federal  gas, then  having  additional  volumes in  the                                                               
system  would  be  beneficial the  state,  particularly  if  it's                                                               
decreasing the  tariff.   However, if  the state  isn't receiving                                                               
any  other royalty  or  tax  benefit from  the  volumes on  those                                                               
federal lands,  it will receive  the benefit of the  lower tariff                                                               
on  the netback  on state  lands.   If  [the additional  volumes]                                                               
increase  the  tariffs  beyond the  initial  rates,  there's  the                                                               
potential  to drive  down the  value to  the state.   There  is a                                                               
separate piece,  which is the impact  on the economy in  terms of                                                               
jobs and  so forth.   What also has to  be factored in,  he said,                                                               
is the  amount of the upstream  piece from the new  gas placed in                                                               
the pipe.                                                                                                                       
                                                                                                                                
REPRESENTATIVE SAMUELS  said he didn't want  to request something                                                               
from Dr. Neri if it's not of value to other members.                                                                            
                                                                                                                                
10:31:57 AM                                                                                                                   
                                                                                                                                
SENATOR THOMAS opined  that initially the desire was  to create a                                                               
different situation than what exists  with the TAPS, which is now                                                               
at a  third of  its capacity.   The  notion was  that development                                                               
would be encouraged if there  was something with the certainty of                                                               
a  timeframe  for  expansion.     Therefore,  he  questioned  the                                                               
certainty  that exists  if  the  owners of  the  gasline are  the                                                               
producers  versus if  the owners  of the  gasline under  AGIA are                                                               
required to have  regular, recurring expansions as  it relates to                                                               
FERC's process  of allowing expansions  when a pipeline  owner is                                                               
opposed to expansion, save for their own purposes.                                                                              
                                                                                                                                
10:33:30 AM                                                                                                                   
                                                                                                                                
DR. NERI offered a hypothetical  situation in which the producers                                                               
pick up  all of  the capacity  on the pipeline  and it  turns out                                                               
that a  fourth entity wants to  enter the pipeline.   Under AGIA,                                                               
the pipeline would  be required to hold an open  season every two                                                               
years.    He  related  his understanding  that  if  the  pipeline                                                               
[owners] don't  want to  expand, the fourth  producer can  file a                                                               
protest with the FERC, which will act on that protest.                                                                          
                                                                                                                                
SENATOR  THOMAS  clarified  that   he  wasn't  speaking  of  AGIA                                                               
expansion but  rather of  an expansion outside  of the  AGIA plan                                                               
because  of  the failure  of  AGIA,  which  causes the  state  to                                                               
proceed with the Denali Plan.   He asked if the response would be                                                               
the same in the aforementioned non-AGIA situation.                                                                              
                                                                                                                                
DR. NERI related his belief  that the Alaska Natural Gas Pipeline                                                               
Act   would   still  provide   the   fourth   producer,  in   the                                                               
aforementioned  example, the  ability  to file  a complaint  with                                                               
FERC.  In further response to  Senator Thomas, Dr. Neri said that                                                               
at that  point FERC would make  a determination as to  whether it                                                               
would require the pipeline to expand.                                                                                           
                                                                                                                                
MR.  DICKINSON highlighted  that the  federal law  specifies that                                                               
the Alaska  pipeline is  an open  access pipeline.   Furthermore,                                                               
for  the  first  time,  Congress  has  said  that  FERC  has  the                                                               
authority to  mandate expansions.   He acknowledged that  it's an                                                               
untried process.   However, under  this law FERC can  mandate the                                                               
expansion.                                                                                                                      
                                                                                                                                
10:36:21 AM                                                                                                                   
                                                                                                                                
SENATOR  WIELECHOWSKI recalled  that  a few  years  ago Econ  One                                                               
Research, Inc.,  did a report  that showed the upstream  rates of                                                               
return for  a natural gas  pipeline were high under  almost every                                                               
circumstance.  He asked whether  Mr. Pulliam has seen anything in                                                               
the analysis that would change the aforementioned opinion.                                                                      
                                                                                                                                
MR.  PULLIAM replied  no, adding  that Econ  One Research,  Inc.,                                                               
hasn't tried to  recreate those analysis under the  new costs and                                                               
prices.   Furthermore, he  said that he  hasn't seen  any changes                                                               
that  would change  his  view  on the  returns,  which he  opined                                                               
should be healthy.                                                                                                              
                                                                                                                                
10:37:16 AM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 10:37 a.m. to 11:09 a.m.                                                                     
                                                                                                                                
11:09:46 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SAMUELS announced that  now members would hear Mr.                                                               
Dickinson's presentation.                                                                                                       
                                                                                                                                
11:09:58 AM                                                                                                                   
                                                                                                                                
MR. DICKINSON reviewed  his assignment as laid out on  slide 2 of                                                               
the presentation  titled "Some things  to look for and  ask about                                                               
in the  AGIA License Determination."   He then turned to  slide 3                                                               
titled  "Part 1.  Major  Reasons Given  to  Vote for  TransCanada                                                               
License,"   which   specifies    that   there   are   enforceable                                                               
commitments,   "dazzling"   amounts   of  money   for   everyone,                                                               
guarantees the state's  must-haves, and provides the  best way to                                                               
get LNG export  and meet in-state gas needs.   Referring to slide                                                               
4 titled "Another  Reason to Support a  TransCanada License," Mr.                                                               
Dickinson  said  he would  argue  that  voting for  this  license                                                               
probably won't  harm the prospects for  a line and, in  fact, may                                                               
strengthen the prospects.                                                                                                       
                                                                                                                                
MR. DICKINSON moved  on to slide 5 titled "Item  #1. What are the                                                               
Enforceable Commitments in  the License?"  He  explained that per                                                               
AGIA  the license  has 20  must-haves of  which 7  are procedural                                                               
issues  related  to  obtaining  a  license,  3  are  pre-sanction                                                               
commitments, 5  are tariff  commitments, and  5 pertain  to local                                                               
commitments.                                                                                                                    
                                                                                                                                
11:15:36 AM                                                                                                                   
                                                                                                                                
MR.   DICKINSON,  referring   to  slide   6  titled   "7  License                                                               
Procedurals,"   said  that   the  aforementioned   seven  license                                                               
procedures  include  filing  a timely  application,  providing  a                                                               
thorough  description   of  the   project,  describing   the  gas                                                               
treatment  plant, proposing  a  reimbursement  plan, waiving  the                                                               
right to  appeal the license  decision, describing  the applicant                                                               
in detail, and demonstrating readiness  to implement the project.                                                               
Mr. Dickinson  noted that  the description  of the  gas treatment                                                               
plant  includes some  rate commitments.   He  explained that  the                                                               
central compression plant  on the North Slope  currently places 9                                                               
Bcf/d  back into  the  ground.   If this  project  is built,  not                                                               
nearly that much gas will have to  be put back into the ground as                                                               
some of the compression may come  over and become part of another                                                               
project.  The  idea is that the aforementioned  won't be included                                                               
in the rate base as if it were  new.  Generally, the GTP would be                                                               
described  and   a  reimbursement  plan  proposed.     Under  the                                                               
TransCanada  proposal how  to get  up  to $500  million from  the                                                               
state for  performing the  initial work  is achieved  by spending                                                               
about $112  million to be matched.   Moving on to  slide 7 titled                                                               
"3 Pre-Sanction  Milestones," Mr.  Dickinson explained  that it's                                                               
an interstate project, it's regulated  by FERC whereas if it's an                                                               
intrastate  project,  it  will be  regulated  by  the  Regulatory                                                               
Commission of  Alaska (RCA).  The  notion is that an  open season                                                               
will be held within 36  months, the pre-filing procedures created                                                               
for an  Alaska gas  project will  be used,  and a  certificate of                                                               
public convenience and necessity (CPCN)  will be applied for by a                                                               
date certain.   The second must-have in the  pre-sanction area is                                                               
that the market  will have to be assessed every  two years, which                                                               
will continue after the pipeline is running.                                                                                    
                                                                                                                                
11:18:06 AM                                                                                                                   
                                                                                                                                
MR.  DICKINSON, referring  to  slide 8,  emphasized  the need  to                                                               
realize that  there isn't  an enforceable  commitment to  build a                                                               
pipeline.    Nothing in  AGIA  commits  the party  obtaining  the                                                               
license to build  a pipeline.  The  aforementioned was emphasized                                                               
by  TransCanada Vice  President  Tony Palmer's  statement at  the                                                               
February 6,  2008, House open  caucus in  which he said,  "We are                                                               
not  obligated to  build  a  pipeline.   That  is  not what  AGIA                                                               
requires."   He  suggested that  any time  such an  obligation is                                                               
expounded, questions  should be asked.   Mr. Dickinson, referring                                                               
to  slide  9,  explained  that  one of  the  must-haves  in  AGIA                                                               
specifies that one must "conclude by  a date certain, that is not                                                               
later than  36 months  after the  date the  license is  issued, a                                                               
binding open  season ...."   In its application  TransCanada says                                                               
it  will  comply with  AGIA,  and  therefore  if the  license  is                                                               
granted this  summer, the expectation  is there would be  an open                                                               
season  no later  than  the  summer of  2011.    However, in  its                                                               
contract TransCanada  said that  it would hope  to have  the open                                                               
season by September  2008.  He pointed out that  one place in the                                                               
contract  specifies  that  TransCanada commits  "subject  to  the                                                               
license  being  issued by  April  2008  to conclude  an  initial,                                                               
binding open  season within 18  months after the issuance  of the                                                               
AGIA license."   As everyone is aware, no license  was awarded by                                                               
2008, he  noted.   Referring to slide  10, Mr.  Dickinson pointed                                                               
out that the contract also  says "TransCanada commits to conclude                                                               
a  binding open  season  by September  30,  2009." while  another                                                               
provision  of the  contract says  "TransCanada would  conduct the                                                               
open season  within 18 months  following the date the  license is                                                               
issued."    Therefore,  one  would   ask  if  there's  a  binding                                                               
commitment for an open season earlier  than 36 months, and if so,                                                               
what date is  it.  Mr. Dickinson related  that his understanding,                                                               
from some informal  discussions, is that before there  is an open                                                               
season, there  was the hope  to have  two seasons of  field work.                                                               
If  the 2008  open  season  is lost,  would  the  open season  be                                                               
September 2010 or would it be  in 2011.  Therefore, he questioned                                                               
whether there is a binding  commitment for an open season earlier                                                               
than 2011.                                                                                                                      
                                                                                                                                
11:22:00 AM                                                                                                                   
                                                                                                                                
MR.  DICKINSON, referring  to slide  11 titled  "Reminder:   What                                                               
does an Open  Season accomplish?", explained that  during an open                                                               
season those  underwriting the project,  the customers,  say that                                                               
if a line  is built they will  ship on the line or  pay as though                                                               
they are  using the line.   Such a commitment allows  the line to                                                               
be  built.   The  question  that should  come  to  mind in  these                                                               
discussions  is  whether a  pipeline  will  be built  without  FT                                                               
commitments.  Furthermore, there should  be a question as to what                                                               
a company is  doing beyond the open season if  they don't have an                                                               
FT commitment.  The commitment in  the license, per AGIA, is that                                                               
the applicant will apply for a FERC  CPCN by a date certain.  The                                                               
date   certain  would   be  specified   in  the   application  by                                                               
TransCanada.  The [application]  specifies, as mentioned earlier,                                                               
that TransCanada commits  subject to the license  being issued by                                                               
April  2008, to  apply for  a FERC  CPCN by  December 2011.   The                                                               
[application] also  specifies that  TransCanada commits  to apply                                                               
for a  FERC CPCN by  December 30, 2011.   Therefore, what  is the                                                               
date certain and  is it conditional upon the  license having been                                                               
issued by  a date it  wasn't issued.   The question  becomes what                                                               
are the enforceable commitments necessary.                                                                                      
                                                                                                                                
MR. DICKINSON  turned to slide  14 titled  "Item #2 What  kind of                                                               
money does everyone make?"                                                                                                      
                                                                                                                                
11:25:15 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE LEDOUX related  her belief that there  seems to be                                                               
a bit of ambiguity in some of the dates.                                                                                        
                                                                                                                                
MR. DICKINSON,  speaking as  a lay person,  said that  he doesn't                                                               
know what is meant by an enforceable commitment.                                                                                
                                                                                                                                
REPRESENTATIVE LEDOUX  questioned whether it would  be prudent to                                                               
clarify  some of  these ambiguities  prior  to possibly  entering                                                               
into litigation.                                                                                                                
                                                                                                                                
MR. DICKINSON  said that no  contract is being signed,  but there                                                               
is a license  that will grant certain things.   He explained that                                                               
first  one looks  at  AGIA to  find out  what's  there, then  the                                                               
[request  for applications]  RFA issued  under AGIA  is reviewed,                                                               
and ultimately the application and  all of its clarifications are                                                               
reviewed to determine  what is being granted in the  license.  In                                                               
further response  to Representative LeDoux, Mr.  Dickinson opined                                                               
that clarity could be achieved by asking questions.                                                                             
                                                                                                                                
REPRESENTATIVE LEDOUX  indicated the  need to  put it  in writing                                                               
versus merely asking questions.                                                                                                 
                                                                                                                                
MR. DICKINSON said he's suggesting that  is a question to ask the                                                               
administration or TransCanada.                                                                                                  
                                                                                                                                
11:27:28 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE DOOGAN  pointed out  that over  the course  of Mr.                                                               
Dickinson's slides  the terms application, license,  and contract                                                               
have been used.  He  inquired as to Mr. Dickinson's understanding                                                               
as to upon what the legislature is being asked to vote.                                                                         
                                                                                                                                
MR. DICKINSON  apologized if he  used the term  "contract," which                                                               
he said  was a misstatement.   He then clarified that  the way to                                                               
determine  what is  in the  license is  to review  the following:                                                               
the statute,  the RFA  issued pursuant to  that statute,  and the                                                               
application that  went through the  process and was  submitted to                                                               
the  legislature.   As  a  part of  the  application review,  the                                                               
questions and  responses used to  clarify the  application should                                                               
also be reviewed.                                                                                                               
                                                                                                                                
11:29:07 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  DOOGAN  surmised,   then,  that  the  applicant's                                                               
answers  to questions  in the  RFA would  be reviewed,  and those                                                               
answers would be  what the applicant is obligated to  do were the                                                               
state to issue a license.                                                                                                       
                                                                                                                                
MR. DICKINSON, speaking  as a lay person, answered  that's how he                                                               
would read that.                                                                                                                
                                                                                                                                
REPRESENTATIVE SAMUELS  relayed that  Mr. Dickinson was  asked to                                                               
go through the three phases  and suggest what questions should be                                                               
asked.                                                                                                                          
                                                                                                                                
11:30:15 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GARA,   referring  to   slide  12,   related  his                                                               
understanding that  the contract doesn't become  unenforceable if                                                               
a license isn't issued by 2008,  but rather that was the proposed                                                               
schedule when TransCanada  filed in November.  He  asked if there                                                               
are  any  legal  opinions  that   say  that  the  contract  isn't                                                               
enforceable.                                                                                                                    
                                                                                                                                
MR. DICKINSON  replied no.   He  added, "As a  lay person,  if it                                                               
says if X, then Y and if not  X, then I'm just questioning what Y                                                               
is."                                                                                                                            
                                                                                                                                
11:31:07 AM                                                                                                                   
                                                                                                                                
MR. DICKINSON,  referring to slide  13, highlighted  the question                                                               
of how does  the project move forward if FERC  approves a project                                                               
without  funding.   He  then  recalled  that  during one  of  the                                                               
[administration's] sessions in Anchorage there  was a question of                                                               
how cost overruns  can be mitigated.  The [response]  was that as                                                               
soon  as FT  commitments are  made, orders  are placed  and early                                                               
commitments for labor  and materials occur because  once there is                                                               
a project and the customers  are committed to it, the certificate                                                               
will be received.  "The  notion," he relayed, "was companies were                                                               
willing to  start spending money to  build a pipeline as  soon as                                                               
they  had  the  FT  commitments;   it  was  that  that  made  the                                                               
difference, not the getting of the certificate."                                                                                
                                                                                                                                
11:32:34 AM                                                                                                                   
                                                                                                                                
MR.  DICKINSON  returned  attention  to slide  14  regarding  the                                                               
notion that  the cash  flows are  so extraordinary  that everyone                                                               
should "sign on."   He clarified that "everyone"  refers to three                                                               
parties.  He  then explained that when there is  a pipeline there                                                               
are shippers, which everyone assumes  will be the producers.  The                                                               
fact is  that those who  have the right to  sell the gas  have to                                                               
get the gas  to a market where  they can sell it.   The owners of                                                               
the gas are  taking a commodity price risk and  as a consequence,                                                               
they  will  pay production  taxes,  income  taxes, and  royalties                                                               
directly to  the state.  The  deal, he reminded members,  is that                                                               
the state  has turned the gas  over to the companies  to sell and                                                               
as a  consequence, the  owners of  the gas  pay royalties  to the                                                               
state.  The  state, then, collects those taxes  and royalties and                                                               
the U.S. and Canadian authorities  collect some taxes.  The state                                                               
is in the position of taking  a portion of the economic rents, he                                                               
stated.  TransCanada  is a carrier and can make  a regulated rate                                                               
of return  [shipping contracted  gas].   He highlighted  that the                                                               
income and  property taxes TransCanada  receives can  be included                                                               
in the  tariff.  The  well-established FERC policy is  that there                                                               
is an  allowance for income taxes  in the rate of  return and the                                                               
property tax  is merely another  operating cost that's  passed on                                                               
to the shippers.  He noted  that there are other taxes, including                                                               
the  federal   taxes,  Canadian   federal  taxes,   and  Canadian                                                               
provincial taxes,  all of which will  be passed on in  the tariff                                                               
to the shippers.                                                                                                                
                                                                                                                                
11:34:32 AM                                                                                                                   
                                                                                                                                
MR. DICKINSON  reminded the members  that the graph  presented on                                                               
slide 15 was  part of TransCanada's application  in January 2008.                                                               
He  reviewed   the  graph,  which   specifies  that   the  Alaska                                                               
producers' netback, after taxes  and royalties, was $183 billion.                                                               
He emphasized that these were  undiscounted values.  The State of                                                               
Alaska's  share  of  the  rents  from  this  would've  been  $115                                                               
billion.   The federal government would've  received $46 billion,                                                               
and TransCanada's return on equity  would've been $16 billion and                                                               
the  Yukon, British  Columbia, and  Canadian federal  governments                                                               
would've received a [total] of $8 billion.                                                                                      
                                                                                                                                
MR. DICKINSON  expressed concern  with the graph  on slide  16 in                                                               
terms of how  the costs were treated.   When TransCanada reviewed                                                               
its calculations of  taxes, it surmised that  after the producers                                                               
receive the netback, they will have  to pay to deliver the gas to                                                               
the transportation facility.   The costs in Prudhoe  Bay for such                                                               
would be minimal while the costs  in Point Thompson would be much                                                               
larger.    TransCanada  used  a  $1.50  on  average.    When  one                                                               
multiplies that through to determine  how much the producers will                                                               
have  to spend  to get  the gas  to the  pipeline, it  amounts to                                                               
about $108-$109  million.  Therefore,  about $75 billion  is left                                                               
that  is cash  flow  to  TransCanada.   In  a similar  situation,                                                               
TransCanada will receive $109 billion,  of which $93 billion will                                                               
be operating costs that  go out.  Yet, if all  the cash flows are                                                               
summed,  the  number will  be  the  same  as  the result  of  the                                                               
calculation  of how  much gas  and  extracted liquids  multiplied                                                               
times the  expected price.  The  graph on slide 16  relates where                                                               
every  dollar  goes,  the darker  sections  illustrate  what  the                                                               
entity specified  will receive while the  red sections illustrate                                                               
the out-of-pocket costs.                                                                                                        
                                                                                                                                
11:37:57 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON asked if, in  the cost section, anything is                                                               
allocated as credits that the  state gives on the upstream costs.                                                               
At these  high prices, basically  half of the upstream  costs are                                                               
borne by  the state.  He  inquired as to how  that's addressed in                                                               
the graph.                                                                                                                      
                                                                                                                                
MR.  DICKINSON   specified  that   in  slide   16,  TransCanada's                                                               
methodology  is  being  used,  which  is  a  situation  in  which                                                               
TransCanada takes  a $1.50  and doesn't  [take into  account] the                                                               
credits.  Therefore, [slide 16]  doesn't include the credit.  Mr.                                                               
Dickinson  opined  that  TransCanada's  focus  was  on  midstream                                                               
issues  rather than  upstream  issues.   The  graph presented  on                                                               
slide 17 illustrates  who ends up with all the  cash and the cash                                                               
flows.  The graph illustrates,  he highlighted, that the State of                                                               
Alaska  is the  large piece  as the  state receives  $115 billion                                                               
with the producers  following with receipt of $74  billion.  What                                                               
the   federal   government   and   TransCanada   receive   remain                                                               
essentially the same.                                                                                                           
                                                                                                                                
11:39:22 AM                                                                                                                   
                                                                                                                                
SENATOR  STEDMAN requested  that Mr.  Dickinson elaborate  on the                                                               
impact the credits create.                                                                                                      
                                                                                                                                
MR. DICKINSON  explained that in  Prudhoe Bay there is  a central                                                               
gas facility  and a  central compression  plant.   Currently, the                                                               
central compression  plant is performing  many things  that would                                                               
have to be done  to prepare gas for the pipeline,  but not all of                                                               
them.   The central compression  plant takes the gas,  strips out                                                               
the water, and puts it back into  the ground in order to keep the                                                               
oil field  under pressure to produce  oil.  When a  stream of gas                                                               
comes off, say 4 Bcf/d, sulfuric  acid and carbon dioxide have to                                                               
be  removed  from it.    He  pointed  out, "The  minimal  capital                                                               
improvements  will have  to be  made  when those  are made  under                                                               
current law to  those facilities.  If  they're not transportation                                                               
facilities, but  they are part  of the upstream  facilities those                                                               
will be deductible  from a producer's income tax and  if they are                                                               
capital investments there  will also be a 20  percent credit that                                                               
can be taken over two years."   However, the Point Thompson field                                                               
will  be  a  green-field  development for  which  there  will  be                                                               
billions  of  dollars  spent,  regardless of  whether  it  is  to                                                               
produce oil, gas, or address  liquids.  If hydrocarbons are being                                                               
produced,  it will  qualify for  credits and  deduction from  the                                                               
producer's income taxes.   For example, Exxon  could be producing                                                               
oil from Prudhoe  Bay at $130 per barrel, which  is a fair amount                                                               
of taxable  value.  If that  money is spent in  Point Thompson to                                                               
develop  that  field,  the  taxes the  [producer]  is  paying  is                                                               
lowered.   Therefore,  it's  a deduction  from  the money  that's                                                               
being  made   on  the   larger  fields   such  as   Prudhoe  Bay.                                                               
Furthermore, after calculating  all the taxes, 10  percent of the                                                               
investment can  be subtracted  in the first  year and  10 percent                                                               
can be  subtracted in  the second  year.   He related  his belief                                                               
that  billions of  dollars  will  have to  be  invested at  Point                                                               
Thompson before any hydrocarbons come out.                                                                                      
                                                                                                                                
11:43:01 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  NEUMAN offered  his recollection  that the  state                                                               
projected that  it would make  approximately $226  billion versus                                                               
the $115 billion presented on the graph on slide 17.                                                                            
                                                                                                                                
MR. DICKINSON reminded  the committee that the graph  on slide 17                                                               
presents the  analysis from TransCanada.   The graph on  slide 19                                                               
titled "Who  makes money in  Black and Veatch May  2008 Version?"                                                               
relates  [that the  state  will  make] more  that  twice what  is                                                               
presented by TransCanada.                                                                                                       
                                                                                                                                
REPRESENTATIVE DOOGAN  pointed out that  this graph, as  have the                                                               
others, treats  the money  as if  it's all paid  out at  the same                                                               
time.  Given the number of  entities receiving money, he asked if                                                               
the timing  of the  payment makes  any substantial  difference in                                                               
regard to what they receive.                                                                                                    
                                                                                                                                
MR. DICKINSON informed the committee  that upcoming slides relate                                                               
Black &  Veatch undiscounted dollars  and discuss why  they would                                                               
be  discounted and  why the  opportunity  cost of  capital is  15                                                               
percent while the state's is 5 percent.                                                                                         
                                                                                                                                
REPRESENTATIVE DOOGAN interjected that there is an assumption.                                                                  
                                                                                                                                
MR. DICKINSON concurred.                                                                                                        
                                                                                                                                
11:44:42 AM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 11:45 a.m. to 1:06 p.m.                                                                      
                                                                                                                                
1:06:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  reviewed the agenda for  the remainder of                                                               
the day.                                                                                                                        
                                                                                                                                
1:07:32 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON,  continuing his presentation, turned  attention to                                                               
slide  18 titled  "Who makes  money in  Black &  Veatch May  2008                                                               
Version?".  The  graph is a reproduction of a  diagram by Black &                                                               
Veatch.   The information on  slide 19 relates the  expected cash                                                               
flows extrapolated  from the graph  on slide  18.  Under  the May                                                               
2008 Black &  Veatch analysis, the total dollars  received are as                                                               
follows:                                                                                                                        
                                                                                                                                
     Canadian government - $3.5 billion                                                                                         
     U.S. federal government - $114 billion                                                                                     
     State of Alaska - $257 billion                                                                                             
     TransCanada - $57.5 billion                                                                                                
     Producers - $154 billion                                                                                                   
                                                                                                                                
MR.  DICKINSON  pointed  out  that   per  AGIA,  Black  &  Veatch                                                               
discounted  the  aforementioned numbers.    He  offered that  his                                                               
explanation of  why discounting occurs is  related to opportunity                                                               
costs.  If one looks at  an investment, one must review what more                                                               
would  be  made, the  added  value,  with the  investment  versus                                                               
merely  placing the  funds in  the  bank.   Therefore, one  would                                                               
discount  [the total  dollars] at  2.5 percent  to determine  the                                                               
additional value of the project.   He opined that the state has a                                                               
negative time value of money.   The point is, he emphasized, that                                                               
it's perfectly appropriate  for it to be low.   In some analysis,                                                               
the rate  of return  earned by  the permanent fund  is used.   He                                                               
highlighted the discount rate for  the various entities under the                                                               
Black  & Veatch  May 2008  version.   For instance,  the discount                                                               
rate  of 10-15  percent.   The point  is that  if an  oil company                                                               
doesn't use the  money on this project, it can  invest in a place                                                               
where  it can  receive a  much higher  return than  if the  state                                                               
doesn't spend  its dollars.   That's why the  discounting exists,                                                               
he  said.    Slide  19  illustrates, under  the  Black  &  Veatch                                                               
analysis, how much better off the  various entities will be.  For                                                               
instance, the  Canadian governments  will be $700  million better                                                               
off and  the U.S.  federal government will  be about  $30 billion                                                               
better off.  He then turned  attention to slide 20 titled "How do                                                               
the Black and  Veatch May 2008 Analysis and  TransCanada Jan 2008                                                               
Analysis of 4.5 bcf/d, 25 year  project compare?"  Looking at the                                                               
total dollars  number, it's  apparent that  in general  they more                                                               
than doubled.   Discounting the TransCanada  streams produces the                                                               
same  type of  movement,  although the  percentage increases  are                                                               
smaller.    The  percentage  increases are  smaller  because  the                                                               
dollars that are  further out have increased the  most, he noted.                                                               
He then pointed  out that the graph on slide  21 provides a sense                                                               
of the order of magnitude difference.                                                                                           
                                                                                                                                
1:14:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN  recalled  previous  testimony  that  both                                                               
ConocoPhillips  and  BP  are  buying   back  their  stock,  which                                                               
indicates they  won't receive the  rates of return being  used in                                                               
the discount rates.  He asked  if that makes any difference about                                                               
the assumptions that  the legislature should be  making about the                                                               
producer's discount rates.                                                                                                      
                                                                                                                                
MR. DICKINSON  replied yes, and  related that  the aforementioned                                                               
indicates  they can't  find all  the opportunities.   He  said he                                                               
would  argue  that  a  discount   rate  of  10-15  is  below  the                                                               
opportunity  cost  of the  companies.    Generally, a  large  oil                                                               
company has [amassed]  lots of cash over the last  few years, and                                                               
generally  the  oil  companies   can't  find  opportunities  that                                                               
provide  that  rate  of  return   if  prices  don't  continue  to                                                               
increase.  Therefore, he opined that  the best way to pass on the                                                               
bonus  to shareholders  is by  repurchasing stock.   Repurchasing                                                               
stock indicates  the capital can't  be employed in a  manner that                                                               
would bring higher returns.                                                                                                     
                                                                                                                                
MS.  ADAIR noted  her  agreement.   She added  that  the rate  of                                                               
return will remain  high because the oil  companies are investing                                                               
in  those  projects already  on  their  balance sheets  and  they                                                               
aren't  investing in  projects with  lower rates  of return.   In                                                               
effect, the  oil companies are  increasing ownership in  those by                                                               
buying back stock for the shareholders.                                                                                         
                                                                                                                                
1:17:14 PM                                                                                                                    
                                                                                                                                
SENATOR  FRENCH inquired  as to  how Mr.  Dickinson analyzed  the                                                               
differences in  the Black &  Veatch analysis and  the TransCanada                                                               
analysis.                                                                                                                       
                                                                                                                                
MR. DICKINSON said he should answer that in the upcoming slides.                                                                
                                                                                                                                
1:17:45 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON,  continuing  with  slide  21,  related  that  the                                                               
biggest driver  is the  price.  He  then highlighted  the changes                                                               
that occurred  in the  producer's and  the state's  netbacks, the                                                               
upstream  values.    The   aforementioned  occurred  because  the                                                               
state's and  producer's money  flows from the  value of  the gas.                                                               
Moving on to  slide 22, Mr. Dickinson pointed  out that generally                                                               
the  Black &  Veatch base  case forecast  and the  Wood Mackenzie                                                               
Alberta Energy  Company (AECO)  forecast are  in the  same place.                                                               
He  then continued  to review  the graph  on slide  22.   Black &                                                               
Veatch has put forward very  aggressive prices, which he reminded                                                               
members  are nominal  prices  that  one would  expect  to pay  in                                                               
today's dollars.   He explained  that the price  that TransCanada                                                               
used  is below  any of  [Black  & Veatch's]  estimates; they  are                                                               
below the 10  percent range.  The exact numbers  are specified on                                                               
slide  23 titled  "How do  the forecast  prices Black  and Veatch                                                               
used  compare  with  those  TCC  used?"    He  recalled  that  in                                                               
discussions  with Mr.  Pulliam, it  came out  that the  long-term                                                               
TransCanada has said  that AECO prices would be  $.75 below Henry                                                               
Hub.   However,  [the Black  & Veatch]  information relates  that                                                               
AECO will sell at a premium to  the Henry Hub prices and thus one                                                               
would add to the Henry Hub prices.                                                                                              
                                                                                                                                
1:21:26 PM                                                                                                                    
                                                                                                                                
MR.  PULLIAM interjected  that the  Wood Mackenzie  AECO forecast                                                               
reviews  flows in  and out  of  the entire  North American  grid.                                                               
With  those  flows  in  mind,   they  are  trying  to  predict  a                                                               
difference between  Henry Hub and  AECO.  He opined  that because                                                               
of  declining  production  from  Canada,  the  differential  will                                                               
tighten over  time.  "They  actually see,  as you get  out beyond                                                               
Alaska  gas  flowing,  some  premium for  AECO  over  Henry  Hub.                                                               
Others  don't see  a  premium, but  do see  a  tightening of  the                                                               
differential," he related.                                                                                                      
                                                                                                                                
1:22:24 PM                                                                                                                    
                                                                                                                                
SENATOR  FRENCH   surmised  then  that  slide   23  relates  that                                                               
TransCanada is predicting a gas price  that is about half of what                                                               
Black & Veatch forecasts.                                                                                                       
                                                                                                                                
MR.  DICKINSON replied  yes, which  is why  there's a  difference                                                               
between the [state's expected cash flow] under the two analyses.                                                                
                                                                                                                                
SENATOR  FRENCH  pointed  out that  the  TransCanada  application                                                               
predicts it  will make more money  than under the Black  & Veatch                                                               
analysis, although TransCanada projects a much lower gas price.                                                                 
                                                                                                                                
MR. DICKINSON  stated that's because  what TransCanada  makes has                                                               
nothing to do with the gas price.                                                                                               
                                                                                                                                
1:23:15 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON moved  on to slide 24, which illustrates  a flat or                                                               
slightly  declining  line  that  represents  TransCanada's  take.                                                               
TransCanada only modeled it's return  on equity.  Therefore, when                                                               
TransCanada  goes into  service in  2018 and  for the  first time                                                               
receives  revenues  from  the  project,   what  of  those  tariff                                                               
revenues  are defined  as  return  on equity,  he  asked.   Under                                                               
TransCanada's model  even though the tariff  is levelized, within                                                               
the  tariff one  can  still build  out the  amount  of return  on                                                               
equity.  As  depreciation occurs, the amount  of equity decreases                                                               
and the  return also  falls.   Referring to  slide 25  titled "Is                                                               
State  harmed or  helped by  delay in  project?", he  pointed out                                                               
that the  Black & Veatch  analysis indicates the state  is helped                                                               
by  delay.   As the  project proceeds  in time,  the state's  NPV                                                               
increases.   In the base case  of $64 billion, a  delay increased                                                               
the  state's  NPV by  $1.8  billion.    Upon further  review,  he                                                               
determined that  the NPV increase  is due to the  production tax.                                                               
He  explained that  as price  increases, higher  progressivity is                                                               
triggered.  In the tax,  the progressivity rate is increased over                                                               
all of  the payments, over all  of the value.   Therefore, as one                                                               
reaches  high gas  prices, the  state's take  is increasing  at a                                                               
rate  that is  much  faster  than the  5  percent  at which  it's                                                               
discounting.     In  other  words,   for  every  year   of  delay                                                               
progressivity  increases, as  does the  base and  the tax.   "You                                                               
knock off 2020, and  you add on a year at  2044 and you've picked                                                               
up $2 billion," he highlighted.                                                                                                 
                                                                                                                                
1:27:27 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH  related his understanding  that slide  24 relates                                                               
that Black  & Veatch  looks for a  higher return  for TransCanada                                                               
than  TransCanada estimates.   However,  that doesn't  coordinate                                                               
with slide 20.                                                                                                                  
                                                                                                                                
MR. DICKINSON  clarified that slide  20 relates  that TransCanada                                                               
shows $16.4  billion coming in while  Black & Veatch shows  it at                                                               
roughly three times  that, $57.5 billion.  The graph  on slide 24                                                               
shows  a  difference of  about  one-third  [between the  Black  &                                                               
Veatch model  of TransCanada cash  flows and  TransCanada's model                                                               
of return on equity], he said.                                                                                                  
                                                                                                                                
1:29:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA, returning to  slide 25, recalled three years                                                               
ago when the  former administration presented one  of the reasons                                                               
to  accept its  proposal was  that  the sooner  the pipeline  was                                                               
[built] more money  would be made; the NPV was  larger the sooner                                                               
the pipeline [was  built].  However, this  analysis presents that                                                               
if there  is a progressive  gas tax,  the later [the  pipeline is                                                               
built], the  better.  "I have  a hard time accepting  any of this                                                               
at this point," he said.                                                                                                        
                                                                                                                                
MR. DICKINSON,  referring to  slide 27,  relayed that  three days                                                               
ago the  current administration said "that  state investment buys                                                               
progress and  delay costs the  state; intrinsic value  because of                                                               
deferred revenue from gas  commercialization."  Traditionally, as                                                               
one thinks  about a world  with lower prices,  the aforementioned                                                               
is  the thought.   He  related his  assumption that  the Black  &                                                               
Veatch report  wasn't presented  in time  to impact  the thinking                                                               
and presentations of others.                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  related his  frustration with regard  to the                                                               
conflicting analysis, but  added that he isn't going  to pursue a                                                               
project that he would try to delay.                                                                                             
                                                                                                                                
MR. DICKINSON  pointed out that  using a lower  price assumption,                                                               
consistently shows  that delay  harms.   However, a  higher price                                                               
assumption  coupled  with  progressivity  shows  that  the  delay                                                               
helps.   As illustrated on slide  26, if the producers  have a 15                                                               
percent discount rate, a higher rate,  it results in a 10 percent                                                               
decrease  if  there is  a  delay  of  a  year.   He  acknowledged                                                               
Representative  Gara's  frustration,  which  he  remarked  should                                                               
drive  questions  about  why [Black  &  Veatch's]  numeric  model                                                               
presents  an  answer  that's  different  than  what  people  have                                                               
assumed for many years.                                                                                                         
                                                                                                                                
REPRESENTATIVE GARA  related that  he feels  mislead a  few years                                                               
ago and  the legislature  should've been  told, if  someone knew,                                                               
that  the NPV  could  be  increased with  a  delayed pipeline  by                                                               
having a progressive tax.                                                                                                       
                                                                                                                                
MR. DICKINSON  suggested that  if anyone  had come  forward three                                                               
years ago and  asked the legislature to base its  analysis on $27                                                               
gas,  the legislature  would've  rejected that.   He  highlighted                                                               
that even in the special session  three months ago when the "bend                                                               
over  point for  progressivity"  was at  $97.5,  the notion  that                                                               
would  be  $40  below  price   was  inconceivable.    He  further                                                               
suggested that folks  are having a hard time keeping  up with the                                                               
price changes.                                                                                                                  
                                                                                                                                
1:33:09 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI, continuing  the discussion regarding delay,                                                               
opined  that specifying  2044 assumes  the  gas stops  then.   He                                                               
suggested,  however,  that the  analysis  should  factor in  that                                                               
there will be continuing gas, beyond 2044.                                                                                      
                                                                                                                                
MR.  DICKINSON  noted  his  agreement,   but  remarked  that  the                                                               
analysis is  cut off at 2044  for comparative reasons.   The cut-                                                               
off  point is,  roughly speaking,  at the  35 Tcf,  which is  now                                                               
known, and "15 yet defined."   As it proceeds further out, it may                                                               
be that the state may make  more and some thought should be given                                                               
as to what  expansions mean in that context.   Mr. Dickinson then                                                               
reiterated  that the  NPV  analysis  is a  critical  part of  the                                                               
formal decision-making process of the administration.                                                                           
                                                                                                                                
1:34:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  recalled that a  couple of years  ago Mr.                                                               
Pulliam ran the cost  of the delay to the state,  in terms of the                                                               
tax rate and  making the NPV the  same.  "And you  ran the number                                                               
at ...  7.25 and a  three-year delay,  you would've had  to raise                                                               
the tax rate by about 40 percent.   It was up to 10.75 to get the                                                               
same net present value, with just a three-year delay," he said.                                                                 
                                                                                                                                
MR.  PULLIAM  confirmed  that  was the  analysis.    However,  he                                                               
reminded the committee that the  analysis back then was for rates                                                               
that didn't have  progressivity.  It's important to  keep in mind                                                               
that these  are fairly low  discount rates to analyze  these cash                                                               
flows,  he opined.    Anything  over 5  percent  produces a  more                                                               
intuitive result,  which is that  delay costs the state  in terms                                                               
of  NPV.   He  recalled  that  the  discount  rates used  in  the                                                               
analysis from a few years ago was in the range of 8-10 percent.                                                                 
                                                                                                                                
1:36:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  remarked  that she  isn't  interested  in                                                               
delaying, even if it may result in an economic benefit.                                                                         
                                                                                                                                
MR. DICKINSON  said that a model  is as good as  what it's trying                                                               
to review  and show.   The administration  properly took  a fixed                                                               
period  and reviewed  what happens  within that  period and  what                                                               
happens  if  that   period  is  shifted.     Clearly,  when  [the                                                               
administration]  is reviewing  the  NPV to  the  state, the  four                                                               
major sources of  cash flow are being reviewed  not the secondary                                                               
effects, the multiplier effects, and  other effects that could be                                                               
of concern.                                                                                                                     
                                                                                                                                
1:37:38 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON, returning to  his presentation, directed attention                                                               
to slide 28  titled "How robust is the assumption  of rising real                                                               
prices over life of project?"   From 1965 to the mid 1980s, there                                                               
were  real rising  prices as  there wasn't  a Henry  Hub or  AECO                                                               
price to which to return.   Then there was another 20-year period                                                               
in which  there was falling  real prices.   Since 2006  there has                                                               
been  dramatically rising  real prices.   When  there are  rising                                                               
prices, there  are supply  effects such  that "people  come out",                                                               
there is an  oversupply, and the price decreases.   Mr. Dickinson                                                               
said there's  no particular reason  that this rise  will continue                                                               
on until  2042.  He  suggested that  there will be  a correction,                                                               
although  he didn't  know when  or how  much.   The point  is, he                                                               
emphasized,  that all  of these  assumptions are  forward-looking                                                               
rising real prices.  The  aforementioned hasn't historically been                                                               
the  case.   Furthermore, the  more pressure  on price,  the more                                                               
vigorous  a  supply  response  is received  and  thus  it's  more                                                               
valuable for folks  to enter the business, which  results in more                                                               
is production  and an  oversupply that results  in a  decrease in                                                               
the price.                                                                                                                      
                                                                                                                                
1:40:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN surmised  that  if  the aforementioned  is                                                               
graphed, the result will be rising  real prices even if the slope                                                               
is different.   He asked if the expectation of  rising prices, as                                                               
applied to  this project, is  really a  question of how  much the                                                               
prices are expected to rise.                                                                                                    
                                                                                                                                
MR. DICKINSON responded, "That's a fair way of observing it."                                                                   
                                                                                                                                
REPRESENTATIVE  DOOGAN   surmised  then  that  the   question  to                                                               
consider is what  is the state's expectations of  the increase as                                                               
well  as the  expectations of  others  and how  the state  should                                                               
analyze those.                                                                                                                  
                                                                                                                                
MR. DICKINSON  confirmed that it's  appropriate to  ask questions                                                               
about a dramatic rising gas price and what it does.                                                                             
                                                                                                                                
1:42:23 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON referred to slide  29 titled "Why are the producers                                                               
concerned about fiscal certainty?"   He posed a scenario in which                                                               
there are  low prices  followed by a  correction that  results in                                                               
higher prices, in real terms, by a  bit.  In such a situation, if                                                               
oil  prices  have fallen  and  there  isn't  much revenue  to  go                                                               
around, the  question becomes  whether the  state tries  to solve                                                               
its  revenue  issues by  having  a  different split  between  the                                                               
producers and  the state  or is  there so  much revenue  that the                                                               
return on investment  clearly meets the hurdle rate.   When there                                                               
is discussion  of fiscal  stability, it's  important to  focus on                                                               
which of those  is the concern.  He noted  that the mechanism the                                                               
state might use to solve either might be very different.                                                                        
                                                                                                                                
1:44:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO, referring  to slide  28, highlighted  that                                                               
1984 was the  middle of the Alaska housing slump.   He questioned                                                               
whether that slump was a reflection  of a much greater decline in                                                               
the economy.  Since 2005,  [Alaska] has been experiencing another                                                               
housing slump, which  he surmised is a reflection  of the overall                                                               
world economy and high petroleum prices.   He asked if in the out                                                               
years there could be a  lengthy decline such that the projections                                                               
would be far off.                                                                                                               
                                                                                                                                
MR.  DICKINSON acknowledged  that  the aforementioned  is a  very                                                               
real possibility  and that the graph  on slide 28 ties  into many                                                               
other things.   He  reminded the  members that  what may  be more                                                               
directly tied  to what was  happening in Alaska in  1985-1986 was                                                               
the dramatic fall in oil prices.                                                                                                
                                                                                                                                
MR. PULLIAM interjected that one must  also keep in mind that the                                                               
period prior  to the late  1980s was  a period of  price controls                                                               
for  natural  gas in  the  U.S.    Therefore, that  first  upward                                                               
movement prior to  1985 was due to prices  being controlled above                                                               
market levels.   When the prices weren't controlled,  there was a                                                               
bit of  a drop down to  normal supply and demand  conditions.  As                                                               
far  as price  projections, it's  certain that  the exact  prices                                                               
won't be what is projected.                                                                                                     
                                                                                                                                
1:47:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON  pointed out  that  during  the period  of                                                               
falling prices, there  weren't two large population  areas of the                                                               
world  entering  the  industrial revolution,  and  therefore  the                                                               
demand that  exists now  didn't then.   She  asked if  that would                                                               
make a large difference.                                                                                                        
                                                                                                                                
MR.  DICKINSON replied  yes.   He  related that  he recently  had                                                               
dinner with  an individual who works  for a law firm  that does a                                                               
lot  of work  in China.    That individual  said in  10 years  he                                                               
expects  there to  be  a full  scale  civil war  in  China.   Mr.                                                               
Dickinson acknowledged  that Representative Wilson  has correctly                                                               
identified a  driving growth  pattern, but  whether that  will be                                                               
sustained may be more difficult to determine.                                                                                   
                                                                                                                                
1:48:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  recalled hearing  in  the  past that  the                                                               
producers needed fiscal  certainty due to the  large scale nature                                                               
of  building  the  pipeline  and the  corresponding  risk.    She                                                               
inquired  as to  the  rationale the  producers  have for  seeking                                                               
fiscal certainty.                                                                                                               
                                                                                                                                
MR.  DICKINSON  explained  that  in the  U.S.  those  taking  the                                                               
commodity price risk,  the people who have to sell  the gas, make                                                               
FT commitments  and thus even  if they have  to sell the  gas for                                                               
less  than  tariff,  they  will   still  pay  the  tariff.    The                                                               
aforementioned  is what  TransCanada  takes to  the bank  because                                                               
it's not  taking the price risk,  other than a minor  fuel piece.                                                               
The aforementioned  is often  referred to as  risk sharing.   Mr.                                                               
Dickinson then reminded the members  that only five years ago the                                                               
producers were  in the U.S.  Congress seeking a price  floor such                                                               
that  they would  receive a  tax break  if the  price fell  below                                                               
about  $2.35.   The concern  [for  the producers]  was that  they                                                               
would  put  the money  out  and  the  effective tariff  would  be                                                               
greater than what  the gas could be sold.   Although that concern                                                               
may  remain, there  may also  be  the opposite  concern in  which                                                               
there is  so much  economic rent being  generated that  the state                                                               
will  want to  renegotiate that  part  of the  arrangement.   The                                                               
fundamental idea,  he emphasized,  is who is  taking the  risk on                                                               
price isn't the pipeline.                                                                                                       
                                                                                                                                
1:51:19 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON, returning to  his presentation, directed attention                                                               
to  slide 30  titled "Words  Matter."   He  highlighted that  the                                                               
administration   has   suggested  avoiding   "subsidies"   and/or                                                               
"billions of dollars in concessions."   However, other aspects of                                                               
the current  license were referred to  as quid pro quos,  such as                                                               
"state  investment  buys  progress   and  state  investment  buys                                                               
provisions."   The notion is  that those  who believe there  is a                                                               
valid need for fiscal stability/certainty  for those who take the                                                               
price risk  would characterize the  situation as quid pro  quo in                                                               
which there will be an  arrangement involving the state's ability                                                               
to use  its taxing authority  and those  who are taxed  when they                                                               
sell the gas.                                                                                                                   
                                                                                                                                
1:52:35 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH  inquired as  to Mr. Dickinson's  view of  the 10-                                                               
year tax certainty offered in AGIA.                                                                                             
                                                                                                                                
MR.  DICKINSON  related  his  understanding  that  the  [language                                                               
related to tax  certainty] was changed, and  therefore he offered                                                               
to answer  later.   Referring to slide  18, Mr.  Dickinson opined                                                               
that  it's   appropriate  for  the   state  to   make  commercial                                                               
arrangements  that  include  fiscal   certainty.    However,  the                                                               
problem  is that  Alaskans don't  want to  give away  things that                                                               
aren't  necessary or  have  reimbursements  that aren't  critical                                                               
whereas the  producers may  argue for a  larger number  than will                                                               
drive  their  decisions.     Therefore,  judgment  regarding  the                                                               
correct  level [of  tax certainty]  will have  to be  made.   Mr.                                                               
Dickinson related that he is  exploring the notion that the state                                                               
seems  willing  to  use  its  taxing authority  as  part  of  the                                                               
arrangements  it will  make  to enable  the  construction of  the                                                               
pipeline.  Ultimately,  there will be various  projections of the                                                               
correct number.                                                                                                                 
                                                                                                                                
SENATOR  FRENCH  opined  that   the  state  has  provided  fiscal                                                               
stability.   Therefore, before sweetening  the pot,  he suggested                                                               
obtaining a commitment  from the producers to  nominate a certain                                                               
amount of gas.                                                                                                                  
                                                                                                                                
1:55:45 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON, referring to slide  31, highlighted that the state                                                               
used  quid  pro quo,  inducements,  to  find  a builder  for  the                                                               
pipeline.    Now the  state  needs  to  find  a financer  of  the                                                               
pipeline.   Mr. Dickinson  then turned to  the difference  in the                                                               
inducements  between the  mid-  and upstream.    He reminded  the                                                               
members that  TransCanada's model doesn't  include progressivity.                                                               
The  notion  is  that  as price  increases,  there  are  dramatic                                                               
increases in the dollars available  upstream that are impacted by                                                               
the production tax,  the income tax, and  the producers' residual                                                               
after  those are  subtracted.   The  Black &  Veatch analysis  on                                                               
slide 33 illustrates  something similar, that is how  much of the                                                               
dollars, sensitivity for the state,  is driven by the oil prices.                                                               
As  Senator  Therriault  pointed  out,  the  tornado  diagram  is                                                               
problematic  because  different  impressions   can  be  shown  by                                                               
choosing what  ranges will be shown.   The overall notion  of the                                                               
diagram  is that  the state's  revenue  on this  matter is  being                                                               
driven  by commodity  prices.   The tornado  diagram on  slide 34                                                               
refers  to the  producers' sensitivities,  for which  the biggest                                                               
driver is also the commodity prices.                                                                                            
                                                                                                                                
1:58:58 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN, speaking  to slide 32, questioned  how valid the                                                               
analysis  is since  it doesn't  take into  account progressivity,                                                               
which is a large impact, and the tie in of oil taxes with gas.                                                                  
                                                                                                                                
MR. DICKINSON recalled that when  TransCanada discussed the graph                                                               
on slide  32, Mr. Palmer  referred to it as  very unsophisticated                                                               
analysis  because  TransCanada focused  on  the  midstream.   Mr.                                                               
Dickinson agreed  with Senator Stedman  that the slide,  since it                                                               
doesn't use progressivity, probably isn't the most useful.                                                                      
                                                                                                                                
SENATOR STEDMAN remarked that part  of his concern when reviewing                                                               
this data is  that progressivity is a substantial  portion of the                                                               
state's tax structure and within  that tax structure there's a 20                                                               
percent  credit.    Unless  progressivity   and  the  credit  are                                                               
recognized, the numbers  reflecting what the state  may gain will                                                               
be off.  He  recalled that being an issue with  the oil tax, when                                                               
the  state was  surprised with  the modeling.   He  expressed the                                                               
hope that a similar mistake wouldn't be made.                                                                                   
                                                                                                                                
MR. DICKINSON  related his understanding that  TransCanada has an                                                               
economic liability spreadsheet,  as required by the  RFA, and was                                                               
frank that  some of the  formulas it  used were simplistic.   The                                                               
Black  &  Veatch analysis  is  more  sophisticated and  has  been                                                               
added.   Therefore, Mr. Dickinson  surmised that  the legislature                                                               
would  prefer to  review those  results from  the Black  & Veatch                                                               
analysis versus the TransCanada analysis.   He said that although                                                               
he hasn't  [thoroughly] reviewed  Black & Veatch's  analysis, the                                                               
Black & Veatch  analysts did things that  TransCanada didn't, and                                                               
therefore there's more precision.                                                                                               
                                                                                                                                
2:02:14 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON moved  on to slide 35 titled  "Everyone Makes Money                                                               
Questions:  Would the producers  make more as producer/carriers?"                                                               
He asked are  the producers making so much money  that they would                                                               
sign on to  this project.  He suggested that  the focus should be                                                               
on  what's  referred to  as  an  incremental  analysis.   If  the                                                               
producers  agreed   to  all  the   AGIA  enhanced   equal  access                                                               
provisions and  built the pipeline,  how much of the  money would                                                               
flow through, he asked.  In  other words, how much of what occurs                                                               
is a  consequence of  this particular  license or  how much  is a                                                               
comparison  of the  two projects.    Referring to  slide 36,  the                                                               
notion is  that a  shipper will  receive returns  from monetizing                                                               
gas  and  after taxes  keep  the  remainder.    There is  also  a                                                               
pipeline, a  carrier, earning  money from carrying  the gas.   If                                                               
that's the same  parent company, then it makes  that $57 billion.                                                               
If there  is a third  party, then the  third party makes  the $57                                                               
billion and  the upstream producer  only makes $154 billion.   In                                                               
simplistic terms, the party that  makes the pipeline will earn as                                                               
a consequences of doing so.                                                                                                     
                                                                                                                                
2:04:32 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  recalled Spencer Hosie's comments  that the                                                               
producers  have  an  obligation  to  sell  if  they  can  make  a                                                               
reasonable profit.   He inquired as to what's considered  to be a                                                               
reasonable profit, $154 billion or $74 billion.                                                                                 
                                                                                                                                
MR.  DICKINSON  responded  that  he,  like  Mr.  Hosie,  couldn't                                                               
quantify what's considered a reasonable profit.                                                                                 
                                                                                                                                
2:05:10 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON,  moving on to  slide 37,  pointed out that  if the                                                               
cash flow  is discounted at  10 percent rather than  8.8 percent,                                                               
it shrinks  considerably.   If it's discounted  at 15  percent, a                                                               
producer would come out behind, he said.                                                                                        
                                                                                                                                
2:07:08 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH, referring to slide  35, pointed out that the $114                                                               
billion  and $256  billion refer  to the  producers, although  on                                                               
slide  35 those  numbers seem  to refer  to the  state.   Senator                                                               
French then requested  that Mr. Dickinson provide  members a two-                                                               
to three-paragraph analysis of how slide 37 works.                                                                              
                                                                                                                                
MR. DICKINSON  agreed to do so.   He mentioned that  income taxes                                                               
weren't included [in the analysis  on slide 37] because the state                                                               
doesn't have a  separate accounting income tax but  rather has an                                                               
apportionment income tax.  Apportionment  income tax means that a                                                               
company's   worldwide   income   is   multiplied   by   a   state                                                               
apportionment  factor, the  sum  of which  is  multiplied by  9.4                                                               
percent.   In  a project  such as  this, most  of the  changes in                                                               
income  tax are  flowing  from the  change  in the  apportionment                                                               
factors   that  come   from   additional  production,   property,                                                               
equipment, or sales.                                                                                                            
                                                                                                                                
2:09:05 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON, speaking  to slide 38, said the question  is:  how                                                               
much money is  flowing from the incremental effects  of the must-                                                               
haves and how  much is flowing from the unenhanced  project.  The                                                               
aforementioned leads  to the  notion of  an enhanced  open access                                                               
pipeline.    As posed on slide  39:  "How does  the state achieve                                                               
an 'enhanced open access pipeline?'"   The goal of the must-haves                                                               
is to  produce an enhanced  open access pipeline such  that there                                                               
will be  an increase in  the benefits and  in an extreme  case of                                                               
open   access,  those   benefits  could   be  written   into  the                                                               
documentation.   He  then turned  to  the enforceable  commitment                                                               
relative to the open access  line.  He explained that TransCanada                                                               
is making  a commitment as to  the position it will  take when it                                                               
goes  before a  regulatory body.   It's  important to  recall, he                                                               
emphasized, that AGIA doesn't effect  the decisions made by FERC.                                                               
Another important point,  in the case of the  producers being the                                                               
opposite party,  is that  the producers'  ability to  argue their                                                               
case isn't constrained.  Therefore,  he suggested that a question                                                               
may  be whether  that  might be  a  more effective  conversation.                                                               
Many  of  TransCanada's  positions   are  ones  they  might  take                                                               
regardless, he noted.                                                                                                           
                                                                                                                                
2:11:58 PM                                                                                                                    
                                                                                                                                
MR.   DICKINSON,  referring   to  slide   40,  highlighted   that                                                               
TransCanada's  commitments refer  to both  what it  will advocate                                                               
for and  negotiate.  However, a  negotiated rate still has  to go                                                               
before FERC or NEB, which may or  may not approve it.  He related                                                               
his understanding that [FERC] likes  negotiated rates.  Moving on                                                               
to  slide  41 titled  "How  will  Third  Parties be  affected  by                                                               
TransCanada's  commitments?",   he  recalled   that  Commissioner                                                               
Galvin suggested  considering whether an entity  would explore in                                                               
the face of  "an unknown and uncertain regulatory  process - that                                                               
doesn't exist  anywhere else, don't  know how long it  will take,                                                               
don't know  whether it will succeed."   The question to  ask, Mr.                                                               
Dickinson  suggested, is  whether TransCanada's  commitments make                                                               
navigating  the  new  rules  at  FERC any  clearer.    "How  much                                                               
uncertainty are folks  used to facing in  the regulatory process;                                                               
how much  does this set of  rules, on one of  the parties, change                                                               
...   the  uncertainties   in   that   regulatory  process,"   he                                                               
questioned.   He then reminded  members that in 2004  the federal                                                               
rules changed  and FERC was given  powers to enforce some  of the                                                               
open access  pipeline provisions.   There is  no knowledge  as to                                                               
how  FERC's normal  practices will  change when  it's faced  with                                                               
enforcing the  new rules.   Referring to slide 43,  Mr. Dickinson                                                               
reviewed the five  tariff commitments, as follows:   expansion in                                                               
reasonable  engineering increments  and on  reasonable commercial                                                               
terms; rolled-in rates; minimum debt  of 70 percent; cost overrun                                                               
mechanisms to  share risk with  shippers; and $500  million state                                                               
spending won't  be part of  the tariff.   He noted that  the $500                                                               
million  state incentive  would accrue  the most  interest as  it                                                               
would essentially be the first funds spent.                                                                                     
                                                                                                                                
2:16:03 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON,  continuing  with  slide 44,  remarked  that  the                                                               
definition  of   "open  access"   has  been  explained   as  when                                                               
"Explorers  have confidence  that the  pipeline will  be expanded                                                               
and new  gas will pay  a fair transportation rate  with rolled-in                                                               
rates."  Deputy Commissioner Rutherford  has said explorers won't                                                               
explore without  confidence.  Therefore, the  question is whether                                                               
TransCanada's commitment  makes a  difference beyond  the federal                                                               
[presumptions].   He  suggested  questioning how  much of  future                                                               
benefits from future  exploration activity flow from  AGIA.  With                                                               
regard  to  rolled-in rates,  one  should  ask how  TransCanada's                                                               
agreement  to  rolled-in rates  impacts  its  bottom line  versus                                                               
whether  TransCanada is  merely rearranging  the dollars  between                                                               
the shippers.   TransCanada is always going to  receive full cost                                                               
recovery  and return  on  its investment.    Assuming the  credit                                                               
risks are equal,  it doesn't matter to TransCanada  who is paying                                                               
those dollars.  He opined that  when one reviews a rolled-in rate                                                               
that  is  moving  a  total  amount  or  just  allocating  between                                                               
shippers,  TransCanada doesn't  care  about that  in most  cases.                                                               
However, the overall tariff rate  does impact TransCanada because                                                               
if the tariff is too  high, TransCanada won't have any customers.                                                               
Still, the certainty  of an entity signing up for  there rates is                                                               
important, he noted.   Mr. Dickinson moved on to  slide 45, which                                                               
relates that  FERC already has  a presumption  favoring rolled-in                                                               
rates for  any project.   The  reason an  entity would  object to                                                               
rolled-in rates  is that the  entity, with a  long-term contract,                                                               
might object to having  to pick up a piece of  an expansion.  The                                                               
question  is whether  it would  be more  effective to  reach that                                                               
likely objection  by talking with  those who would  likely object                                                               
or by  talking to TransCanada, who  may have been neutral  on the                                                               
issue.   With regard to  the limit  on equity percent,  slide 46,                                                               
Mr.  Dickinson said  it's  clearly a  case  in which  TransCanada                                                               
pays.   That's a  compromise that TransCanada  is making  and any                                                               
shipper  will receive  the  benefit  of the  lower  tariffs.   As                                                               
relayed  in  slide  47  with  regard to  the  cost  overrun  risk                                                               
mechanisms,   TransCanada   will  take   on   some   risk.     As                                                               
characterized   in   the    Anchorage   presentations   [by   the                                                               
administration], TransCanada has made a very good opening bid.                                                                  
                                                                                                                                
2:19:44 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON,  referring  to slide  48,  highlighted  that  the                                                               
administration has related that the  $500 million "credit to rate                                                               
base pays for  itself in increased future  revenues."  Therefore,                                                               
the administration believes  it makes sense to lay  out that $500                                                               
million as its  exchange for value.  Therefore, he  said he would                                                               
question whether  the rest of the  must-haves are free.   He said                                                               
he  would also  question whether  there's  a point  at which  the                                                               
state wouldn't  receive a future  benefit from the  state putting                                                               
it's money  in.  He suggested  that there should be  a mechanical                                                               
breakeven point.   Moving on  to slide 49, Mr.  Dickinson pointed                                                               
out that there is the general  notion that the state's netback is                                                               
dependent on  the tariff.   Therefore, if there's a  high tariff,                                                               
the state  makes less money and  vice versa.  One  must remember,                                                               
however,  that  the  majority  of dollars  are  coming  from  the                                                               
state's production  tax.  In  the November 2007  special session,                                                               
the  legislature  changed  those  rules  as  specified  under  AS                                                               
43.55.150(a).    Under the  new  AS  43.55.150(a), the  following                                                               
conditions  were set:   if  the  shipper is  affiliated with  the                                                               
transportation carrier or with a  person that owns an interest in                                                               
the transportation  facility, then the  gross value at  the point                                                               
of   production  is   calculated   using  the   actual  cost   of                                                               
transportation   or  the   reasonable  cost   of  transportation,                                                               
whichever is lower.   Therefore, if, under  the TransCanada plan,                                                               
ConocoPhillips bought a  1 percent interest in  the pipeline, the                                                               
aforementioned  would  be  triggered  such  that  ConocoPhillips'                                                               
tariff would be  the lower of its actual costs  or its reasonable                                                               
costs.   The statute specifies,  "The department  shall determine                                                               
the reasonable  costs of transportation  using fair  market value                                                               
... or other reasonable methods."   In other words, if a pipeline                                                               
shipper  owns any  interest or  has any  commonality of  interest                                                               
with  the pipeline  owner, the  department can  write regulations                                                               
which  determine the  deduction  for purposes  of the  production                                                               
tax.   Although  this  doesn't impact  third  parties, clearly  a                                                               
higher  tariff is  real  money out  of the  pocket  of the  third                                                               
party.   Continuing with slide  50, he highlighted  the following                                                               
questions:  "How  will this license lead to in-state  gas in ways                                                               
that other  project won't?";  "How will this  license lead  to an                                                               
LNG project  in ways that  other project  won't?"  As  related on                                                               
slide 51, the notion is that  all these benefits will flow from a                                                               
pipeline  project,  no  matter  whose  project it  is.    If  one                                                               
believes the  license is  the best/only way  to start  a pipeline                                                               
project, then the aforementioned notion  is correct.  However, if                                                               
that's  not true,  then  the  state should  be  wary of  benefits                                                               
attributable  to  a specific  pipeline  project  covered by  this                                                               
license.                                                                                                                        
                                                                                                                                
2:25:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN asked  if it  would be  equally true  that                                                               
this license is the most likely way to start a pipeline project.                                                                
                                                                                                                                
MR. DICKINSON  replied yes,  adding the caveat  of being  able to                                                               
quantify the likelihood of how much would flow.                                                                                 
                                                                                                                                
REPRESENTATIVE DOOGAN remarked that his  point is that if this is                                                               
being  based  on   a  syllogism,  it  must   be  the  appropriate                                                               
syllogism.                                                                                                                      
                                                                                                                                
2:26:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS announced  that the  meeting would  break                                                               
for  a  Joint Armed  Services  Committee  meeting, and  upon  its                                                               
conclusion the meeting would continue.                                                                                          
                                                                                                                                
The committee took an at-ease from 2:26 p.m. to 3:16 p.m.                                                                       
                                                                                                                                
3:17:25 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON referred to slide  52 titled "5 Local Commitments,"                                                               
which   include   the   five  in-state   takeoff   points;   firm                                                               
transportation  with distance  sensitive  rates  even without  FT                                                               
commitments;  local headquarters;  local hiring  and contracting;                                                               
and a  project labor agreement  (PLA).   He noted that  a company                                                               
that will  move gas  into the state  doesn't necessarily  need to                                                               
make an FT  commitment in the open season.   Therefore, he opined                                                               
that the volume of  gas that will move that way  is so small that                                                               
it  doesn't need  to be  financed 10-15  years in  advance.   The                                                               
question with regard to all  of the aforementioned commitments is                                                               
in regard  to how unique each  is to this particular  project, as                                                               
relayed on  slide 53.   Moving on to  slide 54 titled  "Unique to                                                               
TransCanada Project?",  Mr. Dickinson  questioned how  much local                                                               
commitments account for  if the state received  all 20 must-haves                                                               
for $500 million because any  project would likely include things                                                               
such as local  headquarters.  Another question to  ask is whether                                                               
the   Alaska   Natural   Gas  Development   Authority's   (ANGDA)                                                               
principle:  "Ride as  far as you can in the big  pipe" is tied to                                                               
this  specific license  or  would any  project  include the  same                                                               
aspect.   He then  continued with  slide 55  titled "What  is the                                                               
enforceable  commitment  for  In-State  Rates without  FT?"    He                                                               
reminded  the members  that TransCanada  said it  would offer  FT                                                               
service,  provided that  in-state shippers  execute long-term  FT                                                               
contracts with the  Alaska Section for service.   TransCanada has                                                               
also said, "In  the event there is insufficient  capacity for the                                                               
delivery of in-State  gas, TransCanada is prepared  to expand the                                                               
Alaska  Section to  accommodate  such  deliveries, provided  that                                                               
such expansions are in  engineering increments under commercially                                                               
reasonable   terms  and   conditions."      He  interpreted   the                                                               
aforementioned  to mean  that although  an FT  commitment doesn't                                                               
have to be  made, an entity that gives an  FT commitment when the                                                               
pipeline  is already  full would  only  receive what's  available                                                               
when it's available.                                                                                                            
                                                                                                                                
3:21:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS inquired as to  how it works for the ramp-                                                               
up for  the Fairbanks  market to  slowly increment  to what  is a                                                               
fraction of an  increment.  He then questioned  whether the usage                                                               
in  Fairbanks is  so  small  in the  aggregate  that it  wouldn't                                                               
matter.                                                                                                                         
                                                                                                                                
MR. DICKINSON noted that those  who forecast future use might bid                                                               
on  future capacity.    The  question is  whether  the entity  is                                                               
willing  to make  commitments early  on, prior  to the  build up.                                                               
The difficulty with  long-term contracts is that  others may also                                                               
be making  long-term contracts.   If it's  a matter  of switching                                                               
the Fairbanks economy  to base everything on gas,  that will take                                                               
some  time.   Furthermore,  there  will be  costs  for doing  so.                                                               
Clearly, one  of the issues  is that  of the 4.5  Bcf/d pipeline,                                                               
the state's  concerns is about  a very small piece.   TransCanada                                                               
wants to identify the takeoff  locations upfront, which means the                                                               
construction of  a telescoping pipe.   The difficulty,  he noted,                                                               
is  to determine  the  location  of the  takeoff  points and  the                                                               
amount of  demand.   The aforementioned  decision should  be made                                                               
when the size of the pipe is determined.                                                                                        
                                                                                                                                
REPRESENTATIVE SAMUELS asked if Fairbanks  is such a small amount                                                               
on a 4.5  Bcf/d pipeline that the takeoff  doesn't matter because                                                               
it's such  a small  amount of  gas on a  large pipe.   Or,  is it                                                               
problematic for Fairbanksans  to slowly ratchet up  what they use                                                               
or "is the small amount in the rounding?"                                                                                       
                                                                                                                                
MS.  ADAIR opined  that it's  in the  rounding, at  least at  the                                                               
level  of  project definition  being  discussed  today.   As  Mr.                                                               
Dickinson suggested,  as more [detail]  is available in  terms of                                                               
the design  of the project,  [Fairbanks' off takes  can] probably                                                               
be  accommodated.    She  suggested   that  it  could  likely  be                                                               
accommodated in compression line pack.                                                                                          
                                                                                                                                
3:25:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KELLY   remarked   that  it's   important   that                                                               
TransCanada understand  that Fairbanks,  which will  be in  the 1                                                               
B[cf/d] range, will request that  TransCanada provide for that [1                                                               
Bcf/d] range  and it won't be  required to be nominated  from day                                                               
one.                                                                                                                            
                                                                                                                                
MR.  DICKINSON related  his belief  that if  there's space,  that                                                               
would be appropriate.   However, if it's fully bid  out under the                                                               
current proposal,  then there could  be situation in  which there                                                               
is insufficient capacity  and an expansion to meet  that would be                                                               
required.                                                                                                                       
                                                                                                                                
3:26:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS asked if it's  assumed that when an entity                                                               
bids on pipeline capacity, there's  long-term capacity as well as                                                               
short-term  capacity, which  is  more fungible  in  terms of  gas                                                               
usage.  He  questioned how pipelines work in  small markets, such                                                               
as that of Fairbanks.                                                                                                           
                                                                                                                                
MR.  DICKINSON  answered  that  he  wasn't  sure.    However,  he                                                               
recalled that  TransCanada discussed having several  time ranges,                                                               
in the range of  20-25 years.  He then noted  that during an open                                                               
season, an entity can have  a nonconforming bid and then proceed.                                                               
He said he  didn't recall anything about  shorter timeframes, and                                                               
thus he suggested talking with TransCanada about this point.                                                                    
                                                                                                                                
3:27:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY specified,  "I think that the  words we want                                                               
to hear  would be:   'provide for the  eventual build out.'"   He                                                               
expressed the  desire for the  off-take points for  Fairbanks and                                                               
there to be  enough capacity, in say a decade,  to have the build                                                               
out occur.   The  aforementioned isn't  going to  occur initially                                                               
with the FT commitments.                                                                                                        
                                                                                                                                
3:28:27 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI opined that this  is an important issue.  He                                                               
recalled that according to the  ANGDA presentations, there is 500                                                               
thousand cubic feet (Mcf) to 1  Bcf in potential demand in Alaska                                                               
for  in-state   use.     He  opined   that  going   into  initial                                                               
construction knowing that  there needs to be  an expansion, there                                                               
would need to be a  cost benefit analysis regarding whether there                                                               
should be  a separate  in-state line.   He  pointed out  that the                                                               
tariff would be  lost on that 1 Bcf/d for  Alaska and TransCanada                                                               
would be losing  the tariff that would otherwise  accrue going to                                                               
Alberta.                                                                                                                        
                                                                                                                                
3:29:38 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE  inquired as  to whether a  provision was  made for                                                               
the state to  take its royalty gas in-kind and  how that would be                                                               
accommodated in capacity.                                                                                                       
                                                                                                                                
MR. DICKINSON  answered that  under the lease  the state  has the                                                               
option to take the gas in-kind on  very short notice.  One of the                                                               
areas  in which  the  state  agreed to  fiscal  certainty was  in                                                               
limiting that  ability so  that producers  would know  more about                                                               
what gas  they had  versus the  state's gas.   He offered  that a                                                               
producer would not want to bid  on FT and discover that the state                                                               
"pulls  it out  from  under  you and  you  have empty  capacity."                                                               
However, he related  his belief that in the long  run whether the                                                               
state selects  the royalty gas  in-kind or not, that  someone has                                                               
to make the FT commitment.   He opined that ownership interest in                                                               
the pipeline  would be  irrelevant since no  matter whose  gas it                                                               
is, the  issue is that  someone must  step forward and  say, "I'm                                                               
going to  pay that charge  whether I ship that  gas or not."   He                                                               
said that  he didn't  think that the  upstream shippers  have any                                                               
concern with the state taking its  gas so long as the state makes                                                               
it clear beforehand  so everyone can make an  FT commitment based                                                               
on how  much gas they  will have to  take to the  destinations to                                                               
obtain the highest value.                                                                                                       
                                                                                                                                
3:31:24 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE opined that someone  has to make the FT commitment.                                                               
He   inquired  as   to  whether   that   occurs  through   future                                                               
negotiations when the state decides it  wants a portion of the FT                                                               
such that if the state chooses to  take the gas in-kind it can do                                                               
so.                                                                                                                             
                                                                                                                                
MR. DICKINSON  offered that might be  one way of doing  it if the                                                               
state  didn't feel  it  was ready  in the  first  open season  to                                                               
either  step in,  in place  of the  organizations that  the state                                                               
felt might  use it  or to take  that capacity and  put it  out to                                                               
become  a secondary  market.   He noted  that several  approaches                                                               
could be made.                                                                                                                  
                                                                                                                                
3:32:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY suggested  that  on  the Alaska  "off-take"                                                               
there are  two hurdles, which are  pipe size and FT.   He related                                                               
his understanding  as to  how the  two are  linked.   However, on                                                               
sizing  the  pipeline,  as  Senator  Wielechowski  commented,  he                                                               
opined that the state would want  to avoid the situation in which                                                               
the flange  is sitting useless  until further  expansion happens.                                                               
He  opined  that  the  smaller   in-state  amounts  needs  to  be                                                               
approached with the  appropriately sized pipe and  perhaps the FT                                                               
being  ramped  into  it.    However, the  first  hurdle  is  more                                                               
important than the second hurdle  since the state has the ability                                                               
on  royalties  to easily  satisfy  the  initial requirements,  he                                                               
stated.                                                                                                                         
                                                                                                                                
3:32:59 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON said  he  believes that  the  installation of  the                                                               
flange when  building a pipe  is almost  cost free as  opposed to                                                               
attempting to  do so later.   Therefore, the state might  want to                                                               
over  flange  at  the  time   of  selecting  options  and  making                                                               
commercial arrangements.                                                                                                        
                                                                                                                                
REPRESENTATIVE KELLY remarked that was his point.                                                                               
                                                                                                                                
3:33:24 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON referred to slide  56, which he said highlights the                                                               
same comments  that Senator  Wielechowski made,  which is  to ask                                                               
how TransCanada makes its money.   TransCanada makes its money on                                                               
expansion.   Therefore,  it  will  be allied  with  the state  on                                                               
expansion  and TransCanada  will help  ensure that  happens.   He                                                               
elaborated by  offering the analysis  that TransCanada  makes its                                                               
money on  transporting gas  and its return  on investment  on how                                                               
much plant and  equipment it has.  Thus, if  the company has less                                                               
equipment and  transports less gas  to the Lower  48, TransCanada                                                               
is going  to make less money.   He stated that  TransCanada makes                                                               
the  most money  by  transporting  "the most  gas  over the  most                                                               
miles."   Considering  TransCanada's  alignment  with Alaska,  he                                                               
noted that there may be some misalignment.                                                                                      
                                                                                                                                
MR.  DICKENSON, referring  to slide  57 titled  "AGIA Mechanism,"                                                               
offered  that the  AGIA  mechanism provided  an  inducement to  a                                                               
carrier.  If  a carrier holds an open season,  obtains a license,                                                               
and takes the other steps necessary,  AGIA sets up a situation in                                                               
which  a  line can  be  constructed.    The inducements  for  the                                                               
shippers were  to entice  them to underwrite  the gasline,  or to                                                               
provide the financial underpinning, he offered.                                                                                 
                                                                                                                                
3:35:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ROSES  referred   to  slide   49,  of   proposed                                                               
AS 43.55.150(b), which read:                                                                                                    
                                                                                                                                
     b)  gross   value  at  the   point  of   production  is                                                                    
     calculated using the actual  costs of transportation or                                                                    
     the  reasonable costs  of transportation  ... whichever                                                                    
     is  lower.     The   department  shall   determine  the                                                                    
     reasonable  costs of  transportation using  fair market                                                                    
     value ... or other reasonable methods.                                                                                     
                                                                                                                                
REPRESENTATIVE  ROSES  inquired  as   to  whether  Mr.  Dickinson                                                               
advised  that  if  this  provision  passed as  part  of  the  tax                                                               
revenue, then  [AS 43.55.150](b) would be triggered  in the event                                                               
that the  company has any  affiliation with  the pipe.   Thus, if                                                               
TransCanada guarantees it,  does this provision "kick  in" and if                                                               
so, by passing AGIA did  the legislature create disincentives for                                                               
the companies to become partners, he  asked.  If that is the case                                                               
and  the  state has  created  disincentives  for partnerships  by                                                               
TransCanada, he suggested it provide  a reason for TransCanada to                                                               
build its own line since it will pay the rate either way.                                                                       
                                                                                                                                
3:35:54 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON  acknowledged that as a  good question to ask.   He                                                               
stated  that  he  did  not want  to  prejudice  potential  future                                                               
litigation by  opining on  whether it makes  sense.   However, he                                                               
offered his belief that Representative  Roses identified an issue                                                               
that should be asked since it  does identify the cause and effect                                                               
that would flow from these specific provisions in AGIA.                                                                         
                                                                                                                                
3:36:06 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON  referred   to  slide  58,  and   to  the  carrier                                                               
inducements.  He  stated that a carrier stepped  forward and said                                                               
that it would accept those  inducements in exchange for the "must                                                               
haves."   He said that  the question to  ask is whether  the $500                                                               
million  was exchanged  for something  else, in  which the  state                                                               
created value.   Another way  to phrase  that question is  to ask                                                               
whether  TransCanada  was  allowed  to  "play  with  the  shipper                                                               
chips."   He inquired as to  whether a situation exists  in which                                                               
TransCanada is  doing things that  won't affect its  bottom line,                                                               
but  would affect  the  shipper's  bottom line  and  that is  the                                                               
reason  why the  inducement  was successful.    He asked  whether                                                               
TransCanada  would have  done some  of  those things  even if  it                                                               
wasn't required to do so  under a binding commitment.  Continuing                                                               
with  slide   59,  Mr.  Dickinson   asked  whether   the  shipper                                                               
inducements will  be sufficient by  adding value and  making [the                                                               
gasline] more likely to happen.                                                                                                 
                                                                                                                                
3:37:35 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON, referring to slide 60  titled "Part II: The Vote -                                                               
Beginning or  end of Competition,"  opined that the  questions he                                                               
has raised  will provoke discussion  and provide  useful answers.                                                               
He  offered  that the  legislature  is  faced  with voting  on  a                                                               
proposition and he  wants to suggest some ways  of thinking about                                                               
the proposition.   He stated that  he didn't think that  a lot of                                                               
the  questions he  has raised  are about  the connection  between                                                               
what the  license will  do and  the results.   He opined  that it                                                               
would be  a mistake to vote  against a license on  the basis that                                                               
the legislature  thinks it won't deliver  everything it promises.                                                               
He  suggested that  a  better way  to consider  a  license is  in                                                               
regard to  which license places  the state in a  better position.                                                               
One positive step  in the process is that the  outcome is good if                                                               
awarding a  license encourages another competitor.   He expressed                                                               
concern if  the administration  doesn't treat  this process  as a                                                               
competition, but  as the  end of the  competition.   He cautioned                                                               
that the process  creates a situation in which the  race has been                                                               
won, the  gold medal  is placed around  the winner,  and everyone                                                               
else is shunted  off.  The notion  is that there are  a number of                                                               
producer/state  issues  that  will  affect both  parties  on  any                                                               
project.   He  opined that  it  isn't productive  if the  license                                                               
award  is  treated  as  a  green  light  to  ignore  the  issues.                                                               
Secondly, the legislature wouldn't  be encouraging competition if                                                               
the licensee  has access  to funds in  which the  non-licensee is                                                               
somehow  affected   and  this  project  is   favored  over  other                                                               
potential projects, such  as LNG or the producer line,  or even a                                                               
GTL plant.                                                                                                                      
                                                                                                                                
3:39:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA offered his  understanding that Mr. Dickinson                                                               
is suggesting  that the  state award the  license and  then shift                                                               
the contract  to the producers or  someone else later.   He noted                                                               
his further  understanding that  awarding the  license encourages                                                               
another  competitor.    He  inquired as  to  what  sanctions  are                                                               
contained in  AGIA that would apply  in an instance in  which the                                                               
state  awards the  license, then  bails out  on the  licensee and                                                               
accepts another company.                                                                                                        
                                                                                                                                
MR. DICKINSON  stated his agreement  that the state could  do the                                                               
aforementioned.     However,  he  offered  that   there  is  some                                                               
question,  in  terms of  reviewing  the  definitions, as  to  the                                                               
overall  financial impact.   A  number of  attorneys and  the DNR                                                               
commissioner have advised  that the state would  have a financial                                                               
impact of  about $333 million  maximum.   If, after all  the work                                                               
had  occurred  to  obtain  a   certificate,  the  state  "changed                                                               
horses,"  the  state  would  be   responsible  for  3  times  the                                                               
liability of the  unreimbursed amount, which would  total b about                                                               
$333  million.   Others have  speculated that  the cost  would be                                                               
three times $600  million or $1.8 billion.   Secondly, he pointed                                                               
out  that  one of  the  things  he  heard  in Anchorage  is  that                                                               
negotiations are ongoing.   He opined that the  investors have to                                                               
ensure  that   their  $30  billion  is   protected  and  invested                                                               
appropriately.   In that negotiation  process, the  producer will                                                               
move risks around  and one possibility is that  the producers may                                                               
play a  larger role in this  line, whether it stems  from AGIA or                                                               
not.   He  mentioned that  the license  may impede  that or  not.                                                               
Simply  dropping one  [licensee]  and going  to another  probably                                                               
wouldn't occur, he surmised.   Furthermore, AGIA clearly sets out                                                               
steps to cover instances in  which either side thinks the project                                                               
is  not economically  feasible,  particularly if  the other  side                                                               
disagrees.  The only time that  the triple damages would occur is                                                               
in the event  that the state extends preferential  royalty or tax                                                               
treatment  or  a  grant  of   state  funds  for  the  purpose  of                                                               
facilitating  the   construction  of  a  competing   natural  gas                                                               
pipeline in the  state.  However, if a  negotiation came together                                                               
in which the producers made  the project feasible, it is possible                                                               
that TransCanada  might agree  not to  claim the  triple damages.                                                               
Thus, if  the negotiations occur, it  is just another one  of the                                                               
pieces that would need to be moved around, he remarked.                                                                         
                                                                                                                                
3:43:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA  inquired as  to  whether  Mr. Dickinson  is                                                               
suggesting that  the state grant  a contract and then  breach the                                                               
contract.   He opined that the  state does not want  to be viewed                                                               
as an unstable or untrustworthy partner.                                                                                        
                                                                                                                                
MR. DICKINSON cautioned that he  is not suggesting that the state                                                               
breach  a contract.    He clarified  that what  he  is trying  to                                                               
convey that  the intent  of how this  contract will  be fulfilled                                                               
is, as  the governor stated, the  state stays out of  the way and                                                               
allows the  commercial parties to  negotiate.  He opined  that it                                                               
could be a three-way negotiation  if one commercial party desires                                                               
something that isn't in the  purview of another commercial party,                                                               
but  involves the  state.   In the  event that  such a  situation                                                               
happens, one of the issues will  be whether treble damages may or                                                               
may not occur.  Mr.  Dickinson highlighted that since TransCanada                                                               
has  experience in  negotiating  other deals  and shipping  other                                                               
producers' gas, it  has experience in working  with producers and                                                               
in negotiating tax  rates.  Thus, developing  the gasline doesn't                                                               
create  a unique  experience for  TransCanada, other  than scale.                                                               
He opined  that if a deal  gets put together that  makes sense to                                                               
TransCanada,   it  will   inform  the   state,  particularly   in                                                               
anticipation  that  the  state  will  provide,  as  mentioned  by                                                               
Senator French, "some additional skin."                                                                                         
                                                                                                                                
3:45:26 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI posed  a scenario in which  the state awards                                                               
TransCanada a license and the  producers continue with the Denali                                                               
Project.    He  inquired  as  to  whether  FERC  would  give  the                                                               
TransCanada  license  any  additional  weight due  to  the  state                                                               
support through licensure.                                                                                                      
                                                                                                                                
DR. NERI  answered that  while he  was not  100 percent  sure, he                                                               
didn't think  that the state  issuing the license  to TransCanada                                                               
would carry any extra weight unless legislation passed.                                                                         
                                                                                                                                
3:46:11 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  he asked if  anyone has  a sense as  to how                                                               
FERC  would  analyze  two  separate  proposals,  the  TransCanada                                                               
proposal and the Denali Project.                                                                                                
                                                                                                                                
DR. NERI opined  that FERC's intent would be to  evaluate each of                                                               
the  proposals.   However,  one possibility  is  that FERC  could                                                               
advise that  the two parties  to team up  and work out  a project                                                               
together [in order to avoid] redundancy and waste of resources.                                                                 
                                                                                                                                
MR. DICKINSON recalled  that the same question  was posed earlier                                                               
and received some thoughtful answers  relaying that FERC attempts                                                               
to suggest  what is in everyone's  best interest and when  it has                                                               
allowed commercial parties to work.   He opined that clearly lots                                                               
of  projects exist  in  which compete  parties  attempt to  build                                                               
projects,  when  demand  is  identified.    The  FERC  ultimately                                                               
determines  which project  will work  for the  public convenience                                                               
and necessity.                                                                                                                  
                                                                                                                                
3:47:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  related  his understanding  of  the  AGIA                                                               
process  that   the  state  cannot  preferentially   aid  another                                                               
pipeline.   However, he inquired as  to what would happen  if the                                                               
producers decide  to convert the  gas to liquids, monetize  it at                                                               
the leasehold, and ship it down  TAPS.  He opined that nothing in                                                               
AGIA  prevents  preferential  use  or treatment  if  the  gas  is                                                               
converted to synthetic crude on the North Slope.                                                                                
                                                                                                                                
MR.  DICKINSON   reiterated  that  the  provision   contains  two                                                               
components that  aren't identical, which he  opined is confusing.                                                               
The  trigger  talks  about preferential  treatment,  but  doesn't                                                               
include the remainder of the phrase  in the rest of the sentence.                                                               
He expressed hope that  Representative Seaton's interpretation is                                                               
correct and  that other  projects will  continue to  thrive until                                                               
the projects are no longer compatible.   He said that point is in                                                               
the future  and he would hope  that awarding a license  would not                                                               
change that.   He opined  that the attorneys could  interpret the                                                               
phrase in AGIA and regarding what would trigger the condition.                                                                  
                                                                                                                                
                                                                                                                                
3:49:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  related a scenario in  which the producers                                                               
decide  to monetize  the  gas by  putting it  in  GTL modules  at                                                               
Prudhoe Bay  and use TAPS to  transport it.  He  then inquired as                                                               
to whether anything  in AGIA would prevent or  impact the license                                                               
or any project from moving forward.                                                                                             
                                                                                                                                
MR. DICKINSON  said it did  not, but he suggested  that attorneys                                                               
examine  the  damages questions  since  they  may interpret  AGIA                                                               
differently than a lay person.                                                                                                  
                                                                                                                                
3:50:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KERTTULA  related   her  understanding  that  the                                                               
competition has  already happened, such that  proposals were made                                                               
and this is now based on  availability of the resource.  She said                                                               
that it  is not as though  the state will close  things down, but                                                               
rather what is available at a certain point.                                                                                    
                                                                                                                                
MR. DICKINSON noted his agreement,  adding that the point is what                                                               
resources are  available at  what risk.   He predicted  that over                                                               
the next five days the legislature  will hear that those who take                                                               
the  price  risk  on  the  commodity try  very  hard  to  protect                                                               
themselves from things like cost  overruns and so they negotiate.                                                               
Echoing  his  earlier  comments,   Mr.  Dickinson  stressed  that                                                               
awarding the  license should  be the  kickoff for  the commercial                                                               
negotiation, not the end.                                                                                                       
                                                                                                                                
3:51:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE    SAMUELS   related    a   scenario    in   which                                                               
ConocoPhillips and BP sought a permit  from DNR for a pipeline at                                                               
the  same time  as TransCanada,  and inquired  as to  whether the                                                               
treble  damages clause  would  be triggered.    He surmised  that                                                               
TransCanada   would  claim   that   the   state  couldn't   issue                                                               
ConocoPhillips or  BP the permits since  it is the licensee.   He                                                               
said that  he realizes  Mr. Dickinson isn't  an attorney,  but he                                                               
asked for his opinion.                                                                                                          
                                                                                                                                
MR. DICKINSON, acknowledging that  he isn't an attorney, surmised                                                               
that  it  seems  to  him  that  as  long  as  the  government  is                                                               
functioning as  the government and is  not acting preferentially,                                                               
he would hope  treble damages wouldn't be triggered.   He related                                                               
his  belief that  although  the  rights-of-way are  nonexclusive,                                                               
there  are some  "pinch points."   Moreover,  until the  deciding                                                               
authority, FERC, has  made some decisions, it would  be a mistake                                                               
for the  state to  favor one  project over  another or  grant any                                                               
exclusive rights.                                                                                                               
                                                                                                                                
REPRESENTATIVE SAMUELS noted that  TransCanada would be asked the                                                               
same question.                                                                                                                  
                                                                                                                                
3:53:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO inquired  as to  whether the  license is  a                                                               
license that [the licensee] would own  or that the state lends it                                                               
[to the licensee].  He  further asked whether restrictions apply,                                                               
the producer can sell [the  license], or whether the license will                                                               
sunset.                                                                                                                         
                                                                                                                                
MR. DICKINSON,  speaking to the  last question, explained  that a                                                               
set  of  commitments to  act  would  exist  and, at  some  point,                                                               
TransCanada's  inaction   would  represent  abandonment   of  the                                                               
project.   At  that point,  TransCanada  would turn  over to  the                                                               
state all the work that had  been done to that point, he related.                                                               
Although he said that he  didn't believe a specific sunset exists                                                               
in  AGIA,  the   timelines  have  that  effect.     Referring  to                                                               
Representative Gatto's  earlier question,  Mr. Dickinson  said he                                                               
would "dodge that."   He recalled that it isn't  so much that the                                                               
license could  be sold, but  rather what happens if  ownership is                                                               
changed.  He offered to find out and provide a specific answer.                                                                 
                                                                                                                                
3:56:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  inquired as  to whether the  contract would                                                               
still  be [TransCanada's],  if [TransCanada]  were enter  into an                                                               
agreement  with  the  producers.    He  opined  that  in  such  a                                                               
situation  [TransCanada] couldn't  merely inform  the state  that                                                               
the contract is now shared with the producers.                                                                                  
                                                                                                                                
MR.  DICKINSON  clarified  that  it's a  license.    However,  he                                                               
deferred to an  attorney regarding those kinds of  changes to the                                                               
license.                                                                                                                        
                                                                                                                                
3:56:32 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON,  returning to his presentation,  referred to slide                                                               
61 titled "Beginning  or End of Competition?"   He explained that                                                               
this slide portrays two views  from Commissioner Galvin, one that                                                               
introduces  more  competition  while  the  other  doesn't.    The                                                               
question is which way is the state headed.  Mr. Dickinson said:                                                                 
                                                                                                                                
     The first  one, he  was very  clear and  very forceful.                                                                    
     It says,  "We are not  here to stop them  [the producer                                                                    
     line]."   I think  he was very  explicit that  they can                                                                    
     continue  to move  on whatever  schedule they  had, but                                                                    
     that the administration was  embarked on something with                                                                    
     its own  set of specific guidelines  and timelines, and                                                                    
     it wasn't  an attempt to  move in  a way of  a producer                                                                    
     pipeline.   On the other  hand, at that same  forum, on                                                                    
     the same day, I believe  even the same presentation, he                                                                    
     said  that the  "State has  a considerable  interest in                                                                    
     steering  producer  gas  to the  TransCanada  project."                                                                    
     And again,  what the  state views as  the steps  it can                                                                    
     take to  follow through  on that  considerable interest                                                                    
     are  things  that you  might  question  if what  you're                                                                    
     trying  to do  is keep  the competition  a full-fledged                                                                    
     competition.                                                                                                               
                                                                                                                                
3:57:48 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON noted  that  slides 62  and 63  are  in the  wrong                                                               
order.   He  related that  on slide  63 he  was asking  a cynical                                                               
question by asking, "How can  another 'competitor' with no credit                                                               
and  no  customers strengthen  the  prospect  for  a line?"    He                                                               
offered that  the answer is:   the more information  gathered the                                                               
better.    He opined  that  although  this  is already  the  most                                                               
studied pipeline ever,  much is still unknown.   He surmised that                                                               
given the  size of the  commitment that  it made sense  to gather                                                               
more information.   He pointed  out that  one of the  things that                                                               
can happen  in an "open  season" is  that producers may  use non-                                                               
conforming offers  to forward the  negotiations.  He  opined that                                                               
in a commercial  negotiation other parties figure  out what their                                                               
weaknesses  are  and what  the  other  party  can bring  [to  the                                                               
table].                                                                                                                         
                                                                                                                                
4:00:08 PM                                                                                                                    
                                                                                                                                
MR. DICKINSON,  referring to the  last bullet point on  slide 63,                                                               
related his  understanding that historically,  when FERC  has had                                                               
two competing projects,  it has specified what it  believed to be                                                               
in the national interest and  would suggest ways that the parties                                                               
could resolve issues much in the  way that a judge suggests a way                                                               
to resolve  a case.   In this case,  Congress has told  FERC that                                                               
[Alaska's  gasline] is  clearly  in the  national  interest.   He                                                               
related  that he  has  heard  in a  conversation  today that  the                                                               
aforementioned  isn't as  true recently  as it  was in  the past.                                                               
Therefore, the  question to  ask is  whether FERC  will intervene                                                               
and attempt to merge the parties or not.                                                                                        
                                                                                                                                
4:00:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG inquired as  to whether the legislature                                                               
has access to the work product.                                                                                                 
                                                                                                                                
MR. DICKINSON said that the state  has access to the work product                                                               
if  certain  things  fail.    He  related  his  belief  that  the                                                               
legislature probably has  access to the work  product under AGIA,                                                               
but he offered to research that matter further.                                                                                 
                                                                                                                                
REPRESENTATIVE   GUTTENBERG  related   that  in   his  experience                                                               
construction contracts  sometimes don't  include [access  to work                                                               
product]  provisions.   He related  his  understanding that  many                                                               
legislators  feel that  having a  non-producer owned  pipeline is                                                               
critical  to open  competition  in  Alaska.   He  inquired as  to                                                               
whether the state would still have  an open access project if the                                                               
producers hold the controlling interest in the project.                                                                         
                                                                                                                                
MR. DICKINSON replied  yes, the federal law is  explicit on that.                                                               
He  related his  understanding that  the Anchorage  presentations                                                               
specified  that  AGIA brings  an  enhanced  or true  open  access                                                               
pipeline.   Thus, some  of the questions  raised are  whether the                                                               
ownership  interest   creates  the   difference  or  can   it  be                                                               
mitigated.    He questioned  whether,  under  federal rules,  the                                                               
state adding its  own layer affords that much  protection or not.                                                               
He  stated that  although  he  doesn't have  a  quick answer,  he                                                               
believes being  an open  access pipeline  is embedded  in federal                                                               
law and FERC  will act on that.  Therefore,  one must ask whether                                                               
that's  a sufficient  guarantee,  and if  committing  one of  the                                                               
parties  who is  appearing before  FERC to  something else  is an                                                               
improvement.  He suggested that  perhaps better open access could                                                               
be achieved by talking directly to  the folks who would be trying                                                               
to get  the provisions which  may be viewed as  more controlling.                                                               
"The problem," he said "is knowing  the FERC rules are not tested                                                               
and tried, and so you are  always going to be having, you'll have                                                               
to get opinions  from folks who have been in  front of FERC under                                                               
the old rules and try to figure out what may or may not happen."                                                                
                                                                                                                                
4:04:24 PM                                                                                                                    
                                                                                                                                
SENATOR  WIELECHOWSKI related  his  understanding that  everyone,                                                               
including the  state, seems to  be in agreement that  the gasline                                                               
is a profitable  project.  He inquired as to  whether it's in the                                                               
state's best  interest to  have an  independent entity  build the                                                               
pipeline or  if it's better to  have the producers do  so, if the                                                               
choice  is between  TransCanada and  the Denali  Project or  some                                                               
other producers.                                                                                                                
                                                                                                                                
MR.  DICKINSON answered  that  he personally  doesn't  know.   He                                                               
opined that it's  important to step back and  review what affects                                                               
each  party can  have,  what  they can  provide,  and the  values                                                               
associated  with that.   He  said it  would be  unfortunate if  a                                                               
battle  ensued that  was identified  for the  wrong reasons.   He                                                               
clarified, "What  I'm trying to  say is  I don't have  a personal                                                               
opinion on that and I don't  believe at this stage, voting on the                                                               
license,  that that  answer is  a critical  one, one  way or  the                                                               
other."                                                                                                                         
                                                                                                                                
4:06:44 PM                                                                                                                    
                                                                                                                                
SENATOR  BUNDE referred  to  slide 4  titled  "Another Reason  to                                                               
Support a  TransCanada License" which  he read:   "Probably won't                                                               
harm the prospects for a line  and may strengthen them."  Senator                                                               
Bunde  inquired as  to whether  that  slide poses  a question  or                                                               
provides a statement.                                                                                                           
                                                                                                                                
MR. DICKINSON answered  that slide 4 offers a way  to think about                                                               
the  license and  what  it brings  the state.    The question  is                                                               
whether  irreparable damage  is  caused by  taking  this step  or                                                               
whether there's  an advantage  to this  step and  the legislature                                                               
shouldn't focus on  whether this step leads to the  next step and                                                               
subsequent steps  because there  are so many  steps.   In further                                                               
response  to Senator  Bunde, Mr.  Dickinson  noted his  agreement                                                               
that it's like chicken soup in that it won't hurt.                                                                              
                                                                                                                                
SENATOR  BUNDE asked  the  other  panel members  to  weigh in  on                                                               
whether matter the TransCanada license  probably will not harm or                                                               
will harm [the prospects for a gasline].                                                                                        
                                                                                                                                
MR. PULLIAM noted that this  isn't a question he specifically set                                                               
out to answer.  However, based on  his part in the process, as he                                                               
has   reviewed  the   findings,  listened   to  Mr.   Dickinson's                                                               
presentation,  and been  part of  the  process for  the past  few                                                               
years, he offered that he personally did not see harm.                                                                          
                                                                                                                                
MS. ADAIR  concurred with  Mr. Pulliam.   She said  that although                                                               
she hasn't personally reviewed this  issue, discussing the issues                                                               
further  and  perhaps  clarifying everyone's  position  a  little                                                               
better has  been helpful.   She  offered that  project completion                                                               
will require many  steps and the better  everyone understands the                                                               
needs  of  individual  parties,  the  higher  the  likelihood  of                                                               
success of the project.                                                                                                         
                                                                                                                                
DR.  NERI  answered  that  he,  too,  didn't  see  [granting  the                                                               
license] as harmful to the  process and as mentioned earlier many                                                               
more steps are needed, including obtaining the certificate.                                                                     
                                                                                                                                
4:09:35 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON pointed  out that  it  is easier  to ask  detailed                                                               
questions  about   detailed  projects.     He   recalled  someone                                                               
characterizing the  Denali Project as  a 12-page PowerPoint.   He                                                               
opined  that if  the license  is issued,  in two  years it  would                                                               
likely  result in  two open  seasons from  which the  legislature                                                               
could  learn much  more.   Referring to  slides 64-65,  he stated                                                               
that  the critical  issue is  who is  underwriting this  project.                                                               
Mr. Dickinson, referring to  the upstream conversation, expressed                                                               
the hope  that no one thinks  that granting the license  ends the                                                               
need for conversation and communication on that matter.                                                                         
                                                                                                                                
4:11:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN, assuming  this project  is going  to make                                                               
money for everyone including the  shippers, asked what carrots or                                                               
sticks  could  be  used  or  should  be  used  to  encourage  the                                                               
shippers.                                                                                                                       
                                                                                                                                
MR. DICKINSON  answered that  the question  really comes  back to                                                               
the risks  associated with the  pipeline.  He explained  that the                                                               
those investing the  money want to ensure money is  made and thus                                                               
they reduce their  risks.  He then explained  the "terrible price                                                               
scenario"  in which  the state's  natural  resource wealth  isn't                                                               
worth  as much.   Although  that was  a concern  five years  ago,                                                               
ConocoPhillips may believe  that it's no longer a  concern due to                                                               
rising prices.                                                                                                                  
                                                                                                                                
4:13:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN recalled  that the  Department of  Revenue                                                               
(DOR)  commissioner has  stated several  times that  an important                                                               
goal is for the  state to use the pipeline to  open up the basin.                                                               
He further recalled Mr. Dickinson  mentioning that issue as well.                                                               
He inquired as  to why that issue hasn't  been discussed, whether                                                               
it's  important, and  how awarding  of a  license to  TransCanada                                                               
might affect opening the basin.                                                                                                 
                                                                                                                                
MR. DICKINSON  answered that although  he may not  have addressed                                                               
that issue  expressly, he  opined that  a [gasline]  project will                                                               
open  the   basin.    Therefore,   the  question  is   whether  a                                                               
TransCanada project  will do  a better job  of opening  the basin                                                               
than a  producer controlled project.   The aforementioned returns                                                               
to the  previous discussion, regarding  that federal  law defines                                                               
this as an open access pipeline,  and the question of whether the                                                               
provisions of  AGIA will do more  to open up that  basin than the                                                               
current provisions in  FERC.  If so, and if  the state is trading                                                               
to obtain those provisions, the  question is whether the state is                                                               
trading  the right  amounts.   He  related  his observation  that                                                               
historically  when producers  have  been  involved in  pipelines,                                                               
they often  dispose of them.   However, he acknowledged  that Ms.                                                               
Adair  mentioned earlier  that ConocoPhillips  prefers to  have a                                                               
percentage equal to  what it invests in the pipeline  and thus he                                                               
said he  wasn't guaranteeing that  the producers will  dispose of                                                               
the pipeline.   The question  is whether during the  early years,                                                               
when the state is forming  competition, the producers will resist                                                               
expansions and convey that other  companies aren't welcome in the                                                               
pipeline,  and therefore  other exploration  won't occur  and the                                                               
basin won't  open.   However, he  opined that  TAPS isn't  a good                                                               
analogy from which  to draw that conclusion.  He  said, "As I see                                                               
that  risk in  the  documents  that I've  read,  ... I  certainly                                                               
believe that  the FERC, the  federal concerns, will  do something                                                               
to alleviate that.  And I guess  this is really, at the margin, a                                                               
question of whether the additional  AGIA provisions move you from                                                               
opening the  basin to not opening  it. ... Do they  get the basin                                                               
opened more than just the federal provisions?"                                                                                  
                                                                                                                                
REPRESENTATIVE DOOGAN, assuming Mr.  Dickinson has identified the                                                               
question correctly, requested Mr. Dickinson's answer.                                                                           
                                                                                                                                
MR.  DICKINSON  answered  by  saying   that  as  the  negotiation                                                               
proceeds,  the folks  concerned about  the open  basin provisions                                                               
need  to  ensure those  provisions  are  adequately protected  as                                                               
other commercial arrangements are made.   He said "And the notion                                                               
of a  must have which  ... cannot  be compromised, and  cannot be                                                               
used to  reach a  solution, I  think is  not ...  necessarily the                                                               
best way to proceed towards a given goal."                                                                                      
                                                                                                                                
4:16:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN  pointed out  that some provisions  in AGIA                                                               
aren't protected  in the FERC  process, such as the  treatment of                                                               
rates,  at least  in the  initial expansions,  and the  frequency                                                               
with  which   FERC  will  evaluate   the  necessity   for  future                                                               
expansions.  He said he thought  that review was every two years.                                                               
He inquired as to whether that  provision, which is a part of the                                                               
license but  not part of  the FERC  procedure, is "a  chip that's                                                               
worth playing for here."                                                                                                        
                                                                                                                                
MR. DICKINSON  offered his understanding that  the engineers will                                                               
confirm that the early expansions  lower the overall project cost                                                               
for everyone.   He said, "No  one gets to  show up and say,  if I                                                               
pay for an  extra compressor, can I just pay  for that compressor                                                               
and then  ship."  Therefore,  the question only occurs  when [the                                                               
project produces] several billion cubic  feet a day of expansions                                                               
in the gas.   He opined that the project would have  to be at the                                                               
6.9 Bcf or 7  Bcf before that becomes an issue.   The federal law                                                               
addresses rolled-in  rates, but he  said he doesn't  know whether                                                               
[the state's]  rolled-in rate provision or  [the federal] rolled-                                                               
in rate provision will be more effective.                                                                                       
                                                                                                                                
4:18:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN pointed  out  that AGIA  provides for  the                                                               
shipper to reevaluate every two years.                                                                                          
                                                                                                                                
MR.  DICKINSON related  his belief  that  a the  shipper that  is                                                               
denied expansion can ask FERC for  that expansion.  For the first                                                               
time, FERC  has the authority to  "do it."  He  commented that he                                                               
didn't know whether a solicitation  every two years would enhance                                                               
that process.  However, he  opined that the reevaluation wouldn't                                                               
provide any additional rights before  FERC, which will act as the                                                               
ultimate arbitrator.                                                                                                            
                                                                                                                                
MR.  PULLIAM   noted  his  agreement  with   Mr.  Dickinson  that                                                               
ultimately the  issue will come  before FERC.  He  explained that                                                               
AGIA  provides an  "automatic alignment,"  in which  the pipeline                                                               
has to  go automatically, as opposed  to having a shipper  or the                                                               
state bring  them.   The aforementioned may  move things  along a                                                               
little quicker, he remarked.  No  matter who owns the pipeline, a                                                               
producer or  a third party, their  interest will be to  have more                                                               
gas flowing down  the pipeline for increased  revenues.  However,                                                               
the issues become  clouded when the upstream  pieces are included                                                               
as well.   "Whether those  are really  enough, on the  margin, to                                                               
make ...  a difference, I  don't know,"  he said.   He reiterated                                                               
that with AGIA  the state has an automatic  provision whereby the                                                               
pipeline has  to go to FERC,  which will tends to  speed things a                                                               
bit.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  DOOGAN   surmised  then   that  Mr.   Pulliam  is                                                               
conveying  that [AGIA]  offers some  advantages in  terms of  the                                                               
process, but doesn't guarantee the result.                                                                                      
                                                                                                                                
4:20:39 PM                                                                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI opined that  the producers obviously believe                                                               
this is a profitable project as  they have proposed a $30 billion                                                               
project.   He inquired  as to what  additional carrots  should be                                                               
provided.                                                                                                                       
                                                                                                                                
MR. DICKINSON said that he wasn't sure.  He then remarked:                                                                      
                                                                                                                                
     Is there a right set  to bring about negotiations?  The                                                                    
     state  is taking  the majority  of the  upstream value,                                                                    
     and you  can argue that  is entirely appropriate.   One                                                                    
     of  the  questions  I  raised  here  is  if  the  state                                                                    
     increases  that  by  "x"  percent  it  can  reduce  the                                                                    
     producer's take  dramatically, and is that  a fear that                                                                    
     needs to  be addressed.   Is that  what is  holding the                                                                    
     project back.  If you  identify that, I would view that                                                                    
     as a carrot so to speak.                                                                                                   
                                                                                                                                
4:21:42 PM                                                                                                                    
                                                                                                                                
SENATOR  WIELECHOWSKI  inquired  as   to  whether  Mr.  Dickinson                                                               
considered that a tax break or a concession.                                                                                    
                                                                                                                                
MR. DICKINSON  explained that but  under the current  statute the                                                               
state would  basically be  agreeing to a  10-year "freeze."   The                                                               
question is whether  that's appropriate and how  one would arrive                                                               
at the appropriate level.                                                                                                       
                                                                                                                                
SENATOR  WIELECHOWSKI  asked  if  Mr. Dickinson  thought  it  was                                                               
appropriate.                                                                                                                    
                                                                                                                                
MR. DICKINSON,  speaking as a  citizen, replied yes.   He related                                                               
his belief that  the state's taxing authority is [a  tool] it can                                                               
use to  open the basin.   However,  it would be  inappropriate to                                                               
use taxes,  such as  a reserves  tax, as a  stick and  provide an                                                               
exemption  for only  gas that  went to  a licensed  project.   In                                                               
further response  to Senator Wielechowski, Mr.  Dickinson said he                                                               
didn't see what  the [state's taxing authority] would  be used to                                                               
accomplish  in the  next  60  days.   He  suggested  that if  the                                                               
legislature passes  the license, the process  [should be allowed]                                                               
to work out, such that  investors can make rational decisions and                                                               
negotiate on the points that hold the most concern.                                                                             
                                                                                                                                
4:23:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY,  recalling the  answers to  Senator Bunde's                                                               
earlier  question,   surmised  that  [awarding   TransCanada  the                                                               
license] wouldn't  hurt and might even  help.  He noted  that for                                                               
the past  several days,  legislators have  been told  that either                                                               
[TransCanada or  Denali Project]  have the  ability to  build the                                                               
pipeline.   He offered  his understanding  that the  $500 million                                                               
investment in  nominal dollars  could bring the  state to  over a                                                               
billion in present  value dollars.  Therefore,  he questioned why                                                               
[the  state]  would  eliminate  one   of  the  players  from  the                                                               
beginning rather than move ahead with both players.                                                                             
                                                                                                                                
4:25:16 PM                                                                                                                    
                                                                                                                                
MR.  DICKINSON offered  that  Representative  Kelly provides  the                                                               
basic question  he is trying  to frame.   He opined  that [moving                                                               
ahead with  both players] is  entirely appropriate and  not doing                                                               
so doesn't  seem useful.   The concern,  he related, is  that the                                                               
granting of  the license may be  viewed as a "green  light" to do                                                               
just what Representative Kelly framed.  He then said:                                                                           
                                                                                                                                
     I  hope that,  and  certainly  the administration  said                                                                    
     lots of things  that led me to believe  that they heard                                                                    
     the  same  things from  the  experts  that I  did,  and                                                                    
     concluded  that this  is a  long process  and that  the                                                                    
     more competition  in these early stages  makes the most                                                                    
     sense, and that they would do that.                                                                                        
                                                                                                                                
4:26:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON pointed  out that  AGIA requires  that the                                                               
pipeline  identify how  it  would handle  carbon  emissions.   He                                                               
inquired as to  whether Mr. Dickinson has reviewed  the effect on                                                               
tariffs or  on the probability  of moving forward under  a regime                                                               
of carbon taxes, carbon credits, or carbon sequestration.                                                                       
                                                                                                                                
MR.  DICKINSON  answered that  although  he  didn't review  those                                                               
types  of credits,  he recalled  that the  materials he  reviewed                                                               
offered  some  treatment.    However,   he  couldn't  recall  the                                                               
specifics of the analysis, with respect to credits.                                                                             
                                                                                                                                
4:27:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON opined  that  a carbon  tax  could have  a                                                               
drastic effect on the tariffs.   He inquired as to whether carbon                                                               
credits could be  sequestered and whether the  state would obtain                                                               
the  carbon credits  or whether  the pipeline  company would,  in                                                               
terms of net present value (NPV).                                                                                               
                                                                                                                                
MR. PULLIAM said he didn't  recall carbon credits being addressed                                                               
in the  analysis and that  he isn't  familiar with that  issue at                                                               
this point.                                                                                                                     
                                                                                                                                
4:28:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE    GUTTENBERG,    referring     to    the    prior                                                               
administration's proposal, opined that  the legislature "poured a                                                               
lot of  sugar over  that proposal."   He  inquired as  to whether                                                               
anyone  compared  this  proposal  to that  one,  given  that  the                                                               
current  price  of  the commodity  is  significantly  higher  for                                                               
profit margins.  He expressed concern  that "we have to pour more                                                               
sweetener into the  pot."  He noted that part  of the analysis in                                                               
Anchorage was  to get to  an "open  season" and to  let producers                                                               
come to  table.  He pointed  out the estimate of  $200 billion in                                                               
savings for  consumers once  the gas is  supplied to  the Midwest                                                               
market.   Additionally, he pointed  out that Congress  has viewed                                                               
the  gasline  as a  matter  of  national  importance.   Thus,  he                                                               
questioned the need to "sweeten" the  deal more.  He surmised how                                                               
much better  this proposal is due  to the increased value  of the                                                               
commodity, since the risk remains  the same while the profits are                                                               
higher.                                                                                                                         
                                                                                                                                
MR.   DICKINSON   agreed  that   Representative   Guttenberg                                                                    
accurately  identifies  why  producers are  announcing  this                                                                    
project.   He opined that  the timing may have  something to                                                                    
do with this, given AGIA.   He agreed that after 20 years of                                                                    
low  prices, the  producers  are more  interested  now.   He                                                                    
predicted that if producers believed  prices would stay high                                                                    
and that  the state would  not change the relative  split of                                                                    
economic  rents,  the  producers  might move  forward.    He                                                                    
acknowledged that no one can  guarantee prices, and thus the                                                                    
remaining issue is how the economic rents are split.                                                                            
                                                                                                                                
MR.  DICKINSON  reminded  members that  the  last  administration                                                               
proposed a  project that focused  on the state having  20 percent                                                               
ownership in the pipeline and the  gas and make 20 percent of the                                                               
FT commitment.  The aforementioned  was coupled with locking in a                                                               
20 percent tax  rate with no progressivity, with  which many were                                                               
very uncomfortable.   Since then, a progressivity  piece has been                                                               
added.      Mr.   Dickenson  related   his   understanding   that                                                               
Representative  Guttenberg's  question  "implied that  the  prior                                                               
administration had  piled up a  certain amount of sugar,  and ...                                                               
that I was  arguing that now a  larger pile needed to  be made on                                                               
top of that."  However, he  pointed out that the current proposal                                                               
starts  from a  very  different  place and  is  a very  different                                                               
project.  Still,  the question remains:  would  the guarantees in                                                               
the  aforementioned  contract have  been  sufficient  if all  the                                                               
ownership issues  had ever been worked  out.  He opined  that the                                                               
aforementioned is something no one knows.                                                                                       
                                                                                                                                
4:33:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  stated that  he doesn't want  TransCanada to                                                               
think that  the legislature  will vote  [to approve  its license]                                                               
and then  "use them as  sort of a horse  to ride" and  then "just                                                               
leave them."   He  related his  understanding that  Mr. Dickinson                                                               
suggests that  if the  legislature moves  ahead that  perhaps the                                                               
parties will  negotiate and form  some type of  consortium, which                                                               
he characterized as  acting in good faith.   He expressed concern                                                               
with  Mr. Dickinson's  suggestion that  TransCanada would  invoke                                                               
the  treble   damages  provision   because  the   treble  damages                                                               
provision would  only apply if  the state breaches  the contract.                                                               
He said  he hopes that  Mr. Dickinson  didn't mean to  imply that                                                               
the  state   would  breach  its   contract.    He   recalled  Mr.                                                               
Dickinson's question  as to what the  state needs to do  to bring                                                               
the shippers in to finance the  project.  He surmised that if Mr.                                                               
Dickinson  means  to  let  the   parties  negotiate  and  form  a                                                               
consortium,  he has  no problem  with that.   However,  he opined                                                               
that it's cause  for concern if Mr. Dickinson is  asking what the                                                               
state needs to do to bring  the shippers in to build the project.                                                               
He reiterated his  comfort with the process  that the legislature                                                               
would  approve  the  license  in hopes  that  the  shippers  will                                                               
negotiate  and form  a consortium.   However,  he inquired  as to                                                               
whether Mr.  Dickinson is suggesting  that the state  should take                                                               
actions, invoke the  treble damages under AGIA, and  then let the                                                               
producers build  the pipeline, "in  which case, you  are speaking                                                               
for  yourself  and  as  far  as   I  know,  not  anybody  in  the                                                               
legislature."                                                                                                                   
                                                                                                                                
MR.  DICKINSON  apologized  and as  a  non-attorney  related  his                                                               
understanding that  under one scenario TransCanada  would receive                                                               
an 80 percent  reimbursement and under another  set of conditions                                                               
that reimbursement  would be raised  to three times  some number.                                                               
He opined  that he  didn't know whether  that would  constitute a                                                               
breach  of the  contract.   Clearly, TransCanada  is paid  by the                                                               
state  in  various  conditions  outlined in  the  contract.    He                                                               
commented that  it might  be a  definitional issue.   He  said he                                                               
doesn't think the  state should enter the contract  in bad faith.                                                               
However, certain conditions exist under  which the state will owe                                                               
TransCanada some money  or TransCanada will argue  the state owes                                                               
it money.   He  offered that as  a lay person  he is  confused by                                                               
that  sentence.   He  said,  "If what  you  mean  is meeting  the                                                               
conditions  of that  sentence, that  that  constitutes a  breach,                                                               
then maybe  we're saying the  same thing.   I don't read  it that                                                               
way  and I  don't  think  I'm talking  about  anyone breaching  a                                                               
contract."                                                                                                                      
                                                                                                                                
4:36:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GARA   responded   that   he   understands   Mr.                                                               
Dickinson's answer.  However, he  reiterated that he doesn't have                                                               
any intention  of awarding a  contract to  a party and  then just                                                               
abandoning it.   Such an action, he opined, would  lead to a very                                                               
unstable negotiating atmosphere.                                                                                                
                                                                                                                                
MR. DICKINSON remarked  that what is at issue is  the issuance of                                                               
a license  and not a  contract.   He reiterated that  [AGIA] sets                                                               
out conditions for payment under  the license, which he is unsure                                                               
as to how that fits into breach of contract.                                                                                    
                                                                                                                                
4:36:48 PM                                                                                                                    
                                                                                                                                
SENATOR  THERRIAULT,   referring  to  the  graph   on  slide  37,                                                               
expressed concern that it might  be misunderstood.  He noted that                                                               
when  referring  to the  $13  billion,  Mr. Dickinson  is  really                                                               
discounting the $154 billion listed on the graph on slide 36.                                                                   
                                                                                                                                
MR.  DICKINSON clarified  that the  white  area on  the graph  on                                                               
slide 37 represents the producers' NPV 10 or NPV 15.                                                                            
                                                                                                                                
4:37:47 PM                                                                                                                    
                                                                                                                                
SENATOR  THERRIAULT  pointed  that   that  since  the  amount  is                                                               
discounted  at  different  rates,  it makes  the  state's  profit                                                               
appear to be much larger.   He suggested that Mr. Dickinson could                                                               
have  discounted  the  state  at  4 percent  and  it  would  have                                                               
increased the  state's portion from  $66 billion to  $80 billion.                                                               
He related  that Mr. Dickinson  has arbitrarily  selected values,                                                               
and  thus  the  public  may  be  confused  by  the  slide  titled                                                               
"Everyone makes money questions."                                                                                               
                                                                                                                                
MR. DICKINSON  interjected that the  numbers, NPV 5, NPV  10, and                                                               
NPV 8.8 were  taken from the report.  He  offered his belief that                                                               
the legislature  would hear arguments  as to why the  numbers are                                                               
appropriate numbers.   He explained  that when one  is discussing                                                               
hundreds of billions  of dollars, it's not  something that people                                                               
can automatically translate into  [something meaningful], such as                                                               
how many  car payments  that totals.   Therefore, he  opined that                                                               
it's valid  to discount  the numbers as  long as  one understands                                                               
what's being  compared.  However, he  said he did agree  that the                                                               
chart could be  misinterpreted by someone that  doesn't have that                                                               
level of  sophistication.  "But,  I think if you  understand what                                                               
the concept  is, it does make  sense to ask how  valuable is this                                                               
to the company," he said.  Mr. Dickinson said:                                                                                  
                                                                                                                                
     If I  can go  out and  spend, if  I can  go out  and do                                                                    
     other projects and get a  rate of return, what I really                                                                    
     want to  care about is what  is my increment on  top of                                                                    
     that.   If I  am the state  and I don't  have a  lot of                                                                    
     other options,  then it's appropriate  to look  at that                                                                    
     number differently.  And I  absolutely agree that there                                                                    
     is a great opportunity to  be misled there, but ... the                                                                    
     point I want  to make is ... not only  was there no ...                                                                    
     intent  to  mislead,  there is  an  intent  to  educate                                                                    
     because I really think the notion of discounting makes                                                                     
     sense for certain comparisons.                                                                                             
                                                                                                                                
4:40:00 PM                                                                                                                    
                                                                                                                                
SENATOR THERRIAULT concurred,  but pointed out that  it should be                                                               
made clear  that the 13.5  [in the graph  on slide 37  titled "TC                                                               
Project"] still  represents 40  percent of  the profits  over the                                                               
life of this project, or the period that was chosen.                                                                            
                                                                                                                                
MR.  DICKINSON  responded  that   although  he  hadn't  done  the                                                               
calculations, it "sounds  about right."  He pointed  out, "If you                                                               
said 13.5 in profits,  but what I was trying to  say here is that                                                               
it is the NPV, and could  there have been more words there, sure,                                                               
but I take your point."                                                                                                         
                                                                                                                                
4:40:38 PM                                                                                                                    
                                                                                                                                
SENATOR  THERRIAULT recalled  a conversation  with Dr.  Pedro van                                                               
Meurs, who said  that "once we get  this up and running,  it is a                                                               
cash cow."   However,  in reviewing  the graph  on slide  36, the                                                               
Black & Veatch  estimate shows $154 billion,  which represents 40                                                               
percent  of   the  net  revenues  from   the  economic  activity.                                                               
Although $154  billion is substantial,  when it's reduced  to the                                                               
$13 billion,  that diminishes it.   He offered  his understanding                                                               
that the graph was done for comparison purposes.                                                                                
                                                                                                                                
[HB 3001 and SB 3001 were heard and held.]                                                                                      
                                                                                                                                
4:42:49 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business, the joint meeting  of the House                                                               
Rules  Standing Committee  Subcommittee  on AGIA  and the  Senate                                                               
Special Committee on Energy was adjourned at 4:42 p.m.                                                                          

Document Name Date/Time Subjects